Singapore's central bank devalued its currency less aggressively than expected in a monetary policy review today, signalling growing confidence that the global economy was bottoming out.
The Monetary Authority of Singapore repeated what it had done in previous downturns in 2002 and 2003 by shifting the centre of the secret trade-weighted band for the Singapore dollar down to the existing level of the exchange rate basket, effectively a devaluation.
Based on their estimates of the policy band the Singapore dollar is managed in, economists said the currency might have been devalued by 1.5 to 2 per cent.
Coming alongside news of a 20 per cent quarterly contraction in the economy between January and March, the policy easing appeared inadequate to most analysts. The Singapore dollar rallied on the news.
JPMorgan Chase strategist Claudio Piron said the Monetary Authority of Singapore had been conservative. "There had been some expectation that the re-centring would be as much as a 400 basis points depreciation."
Others pointed to subtle hints of optimism in the central bank's statement, such as the allusions to Singapore's "sound fundamentals", and references to a pick up in leading indicators and improved consumption in the United States.
"The statement was somewhat optimistic with the usual dose of cautiousness," said Emmanual Ng, strategist at OCBC Bank.
Central banks elsewhere in Asia, notably South Korea, New Zealand and Taiwan, have also recently paused in their rate-cut sprees, citing symptoms of a turnaround in global markets.
Other data today meanwhile suggested Singapore's open economy - exports including re-exports are double the total economic output - could be nearing a trough.
Non-oil exports (NODX) fell 17 per cent from a year earlier in March after a record 35 per cent plunge in January and a 24 per cent fall in February. Shipments to China jumped 14 per cent in March.
Reuters