China’s decision to allow greater flexibility in the yuan will not affect the exchange rate policy of Singapore, said the Monetary Authority of Singapore (MAS), as the Singaporean dollar rose to its highest rate against the US dollar in six weeks.
The People’s Bank of China pointed out that it would be abandoning the 6.83 yuan peg to the US dollar approved during the global economic crisis to safeguard exporters. While there was no ground for “large scale” actions, the exchange rate would increase “flexibility”, it said.
The “announcement will not have an impact on Singapore’s exchange rate regime,” said the MAS. “The policy of a modest and gradual appreciation” which was announced on April 14 “remains unchanged and is appropriate against underlying economic conditions,” it added.
Singapore said it would perform a one-time reappraisal and aim for a gradual currency appreciation, as the country recovered at a record rate from last year’s recession.
The policy of managing the Singapore dollar against a number of currencies “allows us to accommodate the changes within the existing framework of our exchange-rate system,” said the MAS, adding that it “will continue to be vigilant over developments in the external environment and their impact on the domestic economy, and stands ready to curb excessive volatility” in the Singapore dollar.
On the yuan move of China, Kelvin Tay, chief investment strategist from UBS, said: “We believe that on a short term basis, the Asian currencies and the Asian equity markets will see a positive upside … because it is an endorsement of the global economic recovery.”