Singapore Dollar Drops Most in 10 Months as U.K. Chooses Brexit

Updated on
  • Monetary Authority says currency stays within policy band
  • There’s a risk next MAS move may be easing, ANZ’s Goh said

Singapore’s dollar fell, heading for its biggest decline in 10 months, after Britons voted to leave the European Union.

The local currency slid to the lowest in three weeks as the U.K. decision spurred concern global growth will slow. The Monetary Authority of Singapore, which guides the currency against a basket of major trading partners, said the trade-weighted local dollar remains within its policy band despite the heightened volatility in foreign-exchange markets. The pound tumbled to a 30-year low.

“The Singapore dollar depreciated when sterling was falling,” said Philip Wee, senior currency economist at DBS Group Holdings Ltd. in Singapore. “Generally, Brexit means a weaker global outlook.”

The local dollar slumped 1.2 percent to S$1.3537 to the greenback as of 4:47 p.m. Friday in Singapore, the biggest drop since August 2015, according to prices compiled by Bloomberg. The city-state’s bonds gained, with the yield on benchmark 10-year falling 11 basis points to 1.93 percent.

Excessive Swings

The MAS said it’s ready to curb excessive swings in the currency. Liquidity positions of the major banks in Singapore are healthy, and overall banking system liquidity remains adequate, it said.

“With MAS policy setting neutral at the moment, inflation still very low, there’s still a risk that the next move by MAS could still be easing,” said Khoon Goh, head of Asia research in Singapore at Australia & New Zealand Banking Group Ltd.

Singapore’s currency has still strengthened 4.8 percent against the dollar this year, the best-performing Asian currency after the yen and Malaysian ringgit. It has benefited from haven demand as the city-state enjoys the highest credit rating and a large current-account surplus, Goh said.

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