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Singapore announces it will let currency increase

In a surprise move, Singapore announced yesterday that it will allow its currency to rise gradually to slow inflation as its economy expands.

Singapore's central bank said it would shift from not allowing the value of the Singapore dollar to rise to "a policy of modest and gradual appreciation."

The Monetary Authority of Singapore is the latest Asian central bank after the Bank of Korea to signal it will allow a stronger currency as the region's economies expand.

The anti-inflation currency measure follows similar policies in Britain, Australia and New Zealand.

Government figures issued yesterday showed the GDP expanded 7.3 percent in the first three months of the year from the same period last year -- the fastest rate since the fourth quarter of 2000. The GDP expanded 4.9 percent in the final quarter of last year from a year earlier.

The Singapore dollar was trading at S$1.6695 to the US dollar at mid-afternoon yesterday, up from S$1.6788 late last week.

The policy shift will help the country's economy grow and ensure that inflation remains low and stable over the medium term, the central bank said in a statement.

The change in policy surprised many economists.

"It seems premature as inflation is still muted and [Singapore's central bank] is ahead of the general trend across Asia," Standard Chartered economist Joseph Tan told Dow Jones Newswires.
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