Currency strategists are abandoning
their forecasts for a record-setting rally in the Singapore
dollar as government measures to rein in property prices reduce
pressure on the central bank to cool inflation.
The local dollar will likely rise 2.2 percent to S$1.21
versus its U.S. counterpart by Dec. 31, based on the median
estimate of 26 analysts surveyed by Bloomberg. The forecast
eased from an all-time high of S$1.19 at the end of last year,
in the biggest outlook downgrade among Southeast Asian
currencies. Singapore’s dollar won’t strengthen beyond the
record of S$1.1992 until 2014, based on the polls.
Prime Minister Lee Hsien Loong is trying to curb property-
market speculation with inflation almost double the 20-year
average. A 1,636-square-foot (152-square-meter) condominium in
the Marina Bay financial district sold for S$4.4 million ($3.6
million) in November, government figures show. A unit about the
same size in London’s Canary Wharf was priced at 2.3 million
pounds ($3.4 million), real-estate broker Foxtons Ltd. said.
“The latest measures should help contain property
prices,” Charlie Lay, a Singapore-based foreign-exchange
strategist at Commerzbank AG, said in a Feb. 25 interview. “As
inflation pressures stabilize, the central bank may favor
boosting the lackluster growth outlook, providing scope for the
Singapore dollar to weaken.”
Asia Outlook
Commerzbank sees the currency at S$1.25 versus the U.S.
dollar at year-end, from S$1.2362 as of 12:47 p.m. local time.
The 1.7 percent downgrade in the median estimate for the
Singapore dollar is larger than those for Indonesia’s rupiah and
Malaysia’s ringgit. The outlook for the Philippine peso was
unchanged, while the Thai baht’s was raised 1 percent.
For all of Asia, the pullback in estimates is second only
to the drop in the Indian rupee forecast, according to data
compiled by Bloomberg.
Singapore’s central bank sets monetary policy via the
nation’s dollar, guiding the exchange rate against a basket of
currencies within an undisclosed band. The Monetary Authority of
Singapore adjusts the pace of appreciation or depreciation by
changing the slope, width or center of the band.
‘Modest’ Appreciation
The central bank said Oct. 12 it will maintain “a modest
and gradual appreciation” of the local dollar. The city-state’s
monetary policy stance remains unchanged as announced in its bi-
annual review in October, Edward Robinson, assistant managing
director of the economic policy department at the MAS, said last
week. Officials are due to make their next decision in April.
Singapore’s dollar has depreciated 1.2 percent this year,
after reaching its all-time high on July 27, 2011, and climbing
6.1 percent in 2012.
“Given the subdued conditions in the global economy,
imported inflation will be broadly benign,” the central bank
and Trade Ministry said Feb. 25. “However, the persistent
tightness in the domestic labor market will support wage
increases in 2013, some of which will continue to pass through
to consumer prices.”
Consumer prices climbed 3.6 percent in January from a year
earlier, after a 4.3 percent advance in the previous period,
government data showed Feb. 25. That’s still almost twice the
20-year average of 1.9 percent.
Banker ‘Dilemma’
Figures released Feb. 22 showed gross domestic product rose
1.5 percent in the three months ended Dec. 31 from a year
earlier. That compares with no growth in the third quarter and a
3.6 percent advance in the fourth quarter of 2011.
The country faces “this dilemma that central banks always
hate, which is lower growth and higher inflation,” Rajeev De Mello, who manages more than $8 billion as the Singapore-based
head of Asian fixed-income assets at Schroder Investment
Management Ltd., said in a Feb. 25 interview. “I still think
they will keep the currency’s appreciation.”
Thousands gathered for a protest on Feb. 16 after the
government unveiled a white paper outlining proposals to boost
the population by allowing more immigration. Residents on the
island that’s smaller than New York City jumped by more than 1.1
million since mid-2004 to 5.3 million, increasing demands on the
nation’s infrastructure and contributing to higher housing and
transport costs.
The median price per square meter for condominiums jumped
to S$11,056 in the fourth quarter, the highest in Urban
Redevelopment Authority data dating back to 1998.
Luxury Taxes
The 2013 budget released Feb. 25 outlined requirements for
companies to pay higher levies for lower-skilled foreign
employees over the next two years and cut the proportion of
overseas workers in some industries. The government also
unveiled plans to raise property taxes for luxury homeowners and
increase duties on investment properties that are vacant or
being rented out.
Those steps came after officials introduced a seventh round
of real-estate cooling measures last month, which included
limits on how much buyers seeking a second mortgage can borrow
relative to the value of their properties. People applying for a
second or subsequent home loan will also have to pay a 25
percent cash down payment, from 10 percent previously.
Gains in housing costs moderated to 4.4 percent last month
after rising 6.7 percent in December, according to a Feb. 25
report by the statistics department.
Sentiment Turn
“The property-curbing measures that have been put in place
mean that we’re not going to see foreign capital inflows coming
into Singapore to the same extent as previously,” Khoon Goh, a
Singapore-based foreign-exchange strategist at Australia New
Zealand Banking Group Ltd. (ANZ), said in a Feb. 25 interview.
“Sentiment has definitely turned against the Singapore
dollar.”
Singapore is one of fewer than 10 nations in the world to
have both a AAA score and a “stable” outlook from all three
major ratings companies. Investors seeking the country’s assets
last year helped drive the benchmark 10-year bond yield to a
record-low 1.29 percent on Dec. 11, prices compiled by the MAS
show. The yield fell to 1.5 percent yesterday, the lowest close
since Feb. 1.
There may not be much demand as the world economy improves,
according to Hideo Shimomura, who helps oversee the equivalent
of $64.3 billion in Tokyo as chief fund investor at Mitsubishi
UFJ Asset Management Co., a unit of Japan’s largest bank.
Rising Volatility
“I don’t have an appetite for taking a risk on this
currency,” Shimomura said in a Feb. 26 interview. “There might
be more fluctuation in other Asian currencies.”
The implied three-month volatility in Singapore’s currency,
a measure of expected price swings over the time period, surged
to a four-month high of 5.4 percent on Feb. 4. It was at 4.7
percent today.
Volatility in the South Korean won, whose projected 4.1
percent gain this year is set to be the biggest among Asian
currencies, dropped to 7.5 percent from a five-month high
reached on Jan. 28. Increased volatility in an asset heightens
the potential for investor gains and losses.
Within Southeast Asia, the Singapore dollar’s estimated 2.2
percent advance in 2013 is forecast to be beaten by a 3 percent
rise in the Malaysian ringgit and a 2.9 percent increase in the
Philippine peso. Benchmark borrowing costs in both countries are
expected to climb this year, according to the weighted average
estimates in Bloomberg News surveys.
“The pace of Singapore dollar’s appreciation this year is
going to be muted,” Dominic Bunning, a Hong Kong-based
associate foreign exchange strategist at HSBC Holdings Plc said
in a Feb. 25 interview. “Compared to other Asian currencies, it
will probably underperform.”
To contact the reporters on this story:
Kristine Aquino in Singapore at
kaquino1@bloomberg.net;
Wes Goodman in Singapore at
wgoodman@bloomberg.net
To contact the editor responsible for this story:
Rocky Swift at
rswift5@bloomberg.net
Enlarge image
Singapore’s Canary Wharf-Topping Condos Damp Dollar
Munshi Ahmed/Bloomberg
A woman on the waterfront boardwalk of the Marina Bay Sands shopping mall takes in the view of the central business district skyline in Singapore. Singapore is one of fewer than 10 nations in the world to have both a AAA score and a “stable” outlook from all three major ratings companies.
A woman on the waterfront boardwalk of the Marina Bay Sands shopping mall takes in the view of the central business district skyline in Singapore. Singapore is one of fewer than 10 nations in the world to have both a AAA score and a “stable” outlook from all three major ratings companies. Photographer: Munshi Ahmed/Bloomberg
Enlarge image
Singapore’s Canary Wharf-Topping Condos Damp Dollar
Munshi Ahmed/Bloomberg
Traffic flows in front of the skyline in Singapore. The central bank said Oct. 12 it will maintain “a modest and gradual appreciation” of the local dollar.
Traffic flows in front of the skyline in Singapore. The central bank said Oct. 12 it will maintain “a modest and gradual appreciation” of the local dollar. Photographer: Munshi Ahmed/Bloomberg
Singapore"s Canary Wharf-Topping Condos Damp Dollar: Currencies
