MAS maintains its "modest &
gradual" SGD appreciation policy and kept its policy parameters
unchanged. The policy stance is deemed appropriate for containing
domestic and imported sources of inflation and to anchor inflation
expectations.
Statement seems finely balanced but with
notable highlights including explicit mention of external growth support
being tempered by domestic supply-side constraints, risk from imported
inflation due to higher expected prices of food imports from the region,
impact of the domestic restructuring as well as downward revisions to GDP
and inflation outlook.
Impact of restructuring on growth-inflation
outlook as well as imported inflationary pressures feeding into cost of
living will play a major role in policy decision making in 6 months time.
Our
previous estimates (in our earlier SGD Preview piece) using productivity
differentials seem to suggest that medium term USD/SGD outlook seems to
be skewed towards the upside over the next 2 years and may suggest a
tendency for the pair to drift upwards based on productivity
differentials. In the near-term, technical support is seen at
1.2652 this week (61.8% Fibo retracement of the Jul-Sep rally). Topsides
are guarded by the 1.2750-barrier. USD/SGD is seen at 1.2850 by end 2014.
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