Maybank FX Flash - SGD - MAS SGD Policy Kept Unchanged

SGD: MAS SGD Policy Kept Unchanged

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.