MAS says it does not engage in currency manipulation after US places Singapore on watch list
The Monetary Authority of Singapore (MAS) said that it does not manipulate its currency for export advantage in response to the US Treasury report that put Singapore on its watch list for exchange rate and macroeconomic policies.
"MAS does not and cannot use the exchange rate to gain an export advantage or achieve a current account surplus. A deliberate weakening of the Singapore dollar would cause inflation to spike and compromise MAS' price stability objective," said the central bank in a media statement.
MAS added Singapore's monetary policy framework has always been aimed at ensuring medium-term price stability.
MAS does not and cannot use the exchange rate to gain an export advantage or achieve a current account surplus"
MAS manages the Singapore dollar nominal effective exchange rate (S$NEER) within a policy band, which MAS pointed out is "just as other central banks conduct monetary policy by targeting interest rates".
A 1988 law requires the US Treasury Department to report to the US Congress every six months on whether any countries are manipulating their currencies to gain trade advantages over the US.
If deemed to be a currency manipulator, US could impose trade sanctions.
Eight other nations — China, Germany, Ireland, Italy, Japan, Malaysia, South Korea and Vietnam — are on the monitoring list, based on the US Treasury's latest twice-yearly report to the US Congress.
US had accused three economies of being currency manipulators in the past, the latest being China 25 years ago.
Japan was stamped with that label in 1988 and Taiwan, in 1988 and 1992.
The US Treasury tightened the criteria for its watch list and expanded its coverage from its 12 largest trading partners to those which trade more than $40bn billion (S$55bn) with the US.
Countries with a current account trade surplus equivalent to 2% of gross domestic product will now be considered for the list, down from 3% previously.
Another criterion of a trade surplus of at least $20bn with the US remains unchanged, while the definition of what constitutes a persistent intervention in the foreign exchange market is narrowed to net foreign currency purchases of more than 2 per cent of GDP in six out of 12 months, down from eight out of 12 months.
Singapore, having met two out of the three criteria - on its current account surplus and market intervention - was placed on the watch list.
The US Treasury noted in its report: "Singapore runs one of the largest current account surpluses in the world as a share of GDP at 17.9% in 2018." It also estimated that Singapore made net foreign currency purchases of at least $17bn last year, equivalent to 4.6% of GDP - more than double its threshold.
The report urged Singapore to undertake reforms to lower its high savings rate and boost low domestic consumption to help narrow its large and persistent external surpluses.
Although being on the watch list does not result in any immediate punitive measures from the US, economists say the markets may be a little jittery.
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