A key benchmark rate in Singapore, the three-month Singapore interbank offered rate (SIBOR) eased to a two-week low on Tuesday, dropping to 1.01441 percent, its lowest level since 30 March.
According to a Reuters report, the correction came after the local currency rose following the Monetary Authority of Singapore’s (MAS) move to maintain its policy to allow a “modest and gradual” appreciation of the Singapore dollar.
However, the three-month SIBOR still remains up by 56 basis points since the recorded rate in the beginning of the year, and is on track for its biggest annual increase since 2005.
SIBOR is the rate at which banks loan from one another, and is also the rate at which most home loans are pegged at. An increase on the SIBOR reflects tighter domestic money market conditions and weakness in the Singapore dollar. Weakness of the local currency versus its foreign counterparts can put upward pressure on local interest rates as investors seek more incentive to hold on to the local currency.