Singapore central bank says policy stance appropriate as virus hits economy

But the Monetary Authority Of Singapore, which eased policy for the first time in three years at its last meeting in October, said on Wednesday its key currency gauge had been trading near the top of its policy band, and therefore, has room to depreciate to accommodate any economic hit.

SINGAPORE: Singapore's central bank said its exchange rate-based monetary policy stance remains unchanged and that the currency has room to ease within its current settings amid weakening economic conditions due to the outbreak of the coronavirus in China.

Singapore, which recorded its weakest pace of expansion in a decade last year, has warned that the epidemic will hurt its economic growth this year.

But the Monetary Authority Of Singapore, which eased policy for the first time in three years at its last meeting in October, said on Wednesday its key currency gauge had been trading near the top of its policy band, and therefore, has room to depreciate to accommodate any economic hit.

"There is sufficient room within the policy band to accommodate an easing of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) in line with the weakening of economic conditions as a result of the outbreak of the 2019 novel coronavirus in China and other countries, including Singapore," MAS said in a statement responding to media queries.

It said it was monitoring economic developments closely and its next policy review would be in April as scheduled.

"The statement is to curtail speculation that something is about to happen," said Rob Carnell, Asia-Pacific chief economist at ING.

Yet, in the wake of the announcement, the Singapore dollar hit its weakest against its U.S. counterpart since October, down 0.8% on the day - the top loser among emerging Asian currencies - and suggesting some see potential for further easing.

"There has been some speculation that they (MAS) may ease, but they are telling everyone that they have room not to do anything," said Philip Wee, senior currency strategist at Singapore's biggest bank DBS.

"But at the same time, at this point, there is no clarity on what the impact (of the coronavirus) may be."

Singapore, one of the worst-hit countries outside of China in the 2003 outbreak of Severe Acute Respiratory Syndrome (SARS), has reported 24 cases of new coronavirus, including some involving local transmission.

The death toll from coronavirus in China neared 500 on Wednesday. - Reuters