The recent blog post on currency fluctuation was written 13 April 2012. Singapore dollar strengthened against most major currencies on that day. Since core inflation remains elevated, the Monetary Authority of Singapore (MAS) decided to tighten its monetary policy to moderate inflation in its April policy statement. This caused Singapore dollar to appreciate on 13 April.
Yesterday, MAS and the Ministry of Trade & Industry (MTI) jointly released Singapore inflation figures for March. Singapore’s CPI-All Items inflation rose to 5.2% year-on-year in March 2012. This figure was higher than the 4.6% inflation in February. Inflation did not ease as most analysts were expecting. The result was another round of Singapore dollar currency appreciation against some currencies.
The Australian dollar was badly hit compared to other currencies with a single-day depreciation against Singapore dollar of 0.69% (as at 6.31 am today). For the day, Australian dollar moved down from 1.295 to 1.287 (1A$ to S$).
On 13 April, some one week ago, Australian dollar lost 1.03% to 1.294 against Singapore dollar. As I write, Australian dollar is trading at 1.2814 (2.14 pm), further decline today.
Another reason for Australian dollar to weaken is due to expectation that the central bank of Australia (RBA) would cut its discount rate in order to boost economic growth in Australia. With a reduction in discount rate, the general interest rate in Australia is expected to decline and investors are therefore pulling out funds from Australia resulting in demand for Australian dollar to drop. With weaker demand for Australian dollar, its currency will depreciate against global currencies, including Singapore dollar.
Copyright © 2012, limkimtong for Living Investment
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