By Ronnie Harui
Singapore's central bank eased its currency policy on Monday, citing the severe contractions in the local and global economies caused by the Covid-19 pandemic.
The Monetary Authority of Singapore said it will adopt a 0% rate of appreciation of the policy band starting at the prevailing level of the Singapore dollar nominal effective exchange rate, with no change to the band's width.
The MAS manages the Singapore dollar within a band determined by the currency's NEER. It uses foreign exchange instead of interest rates as its main monetary policy tool as trade dominates the country's economy.
MAS said it will continue to watch developments in the economy and financial markets, and is ready to curb excessive volatility in the NEER.
The easing comes after advance estimates last week showed the economy contracted 10.6% on quarter in the first quarter on a seasonally adjusted and annualized basis--the biggest fall in nearly a decade.
The government expects full-year gross domestic product will fall as much as 4%, which would be the worst contraction since the nation became independent.
At its October review, the MAS slightly reduced the rate of appreciation of the SGD NEER policy band and made no changes to the width nor to the level at which it was centered.
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