[T.S.R:16005] Currency Wars Led By Japan, Korea & Singapore Could Stiffen Pitch For Asia

Monetary Authority of Singapore surprises market It is becoming increasingly clear that US, Euroland dedicated growth is getting and will get even more stunted, even as banks sloshed with zero cost US Dollars find their coffers filled to the brim with no outlet in sight. Pitched against domestic inflation Asian currencies will rise, credit lending will fall but unmitigated cash flows from the West will lead to Asset bubbles in Asia as low interest rates force investors to BUY just about any asset. This will leave no alternate but intervention  in the currency markets.   In a surprise move, Singapore's central bank said Thursday it would widen the trading range of its currency in order to send it higher, following the release of data showing economic growth is cooling.   The move sent the Singapore dollar to a record high against the U.S. dollar. Singapore's main monetary-policy tool is adjusting the trading range of its currency, rather than setting a policy interest rate.   Singapore remains on course to be the Switzerland of Asia as foreign investors flood into its foreign exchange and equity markets. The Monetary Authority of Singapore said it would slightly widen the band set for trading in the Singapore dollar against a basket of currencies, to allow a "modest and gradual appreciation."   The move "represents a moderate tightening of policy ... and seems to reflect an assessment that the risk of higher inflation outweighs concerns about externally-driven weaker growth," said RBC Capital Markets analysts in a note to clients.   The move caught the markets unaware, with all economists polled in a separate Dow Jones survey predicting the Monetary Authority of Singapore would keep currency policy unchanged.   The policy decision came as Singapore announced its economy shrank at a 19.8% annualized rate in the third quarter from the prior quarter, following on second-quarter growth of 27.3%.   Economists had expected the latest data would point to a period of softness, though the decline was steeper than the 17.5% contraction tipped in a Dow Jones Newswires poll. However, compared with the year-earlier quarter, the island state's economy expanded by 10.3%, the data showed.   At its semi-annual meeting in April, the monetary authority said it would allow its currency to move in a stronger trading range.   RBC said the policy shift at that time meant the authority was targeting an annual appreciation of about 2% to 3% from the mid-range of its unpublished trading band. Thursday's announcement likely means the central bank has lifted its annual appreciation target to around 3% to 4% from the mid-range of the band, RBC said.   RBC noted Singapore's authorities were likely surprised at the pace of gains in its currency against the U.S. dollar since April's announcement, adding that exports have remained buoyant regardless.   The Singapore dollar rose 0.6% to 1.2946 per dollar on Thursday, compared to its previous close of $1.3026, according to Factset Research figures. RBC forecast the U.S. dollar (U.S.:USDSGD)  would fetch S$1.20 by the end of the year. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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