Singapore may weaken dollar to answer yen: Brown Brothers

The SGD has the most positive link to the JPY in all of the region.

The surprise move by the Bank of Japan to expand its unprecedented monetary stimulus last week may convince its counterpart in Singapore to allow a weaker currency, according to Brown Brothers Harriman & Co.

According to a report by Bloomberg, the Monetary Authority of Singapore maintained its pace of currency appreciation last month to fight inflation, a tightening stance that contrasts with neighbors including South Korea, China and Japan. The central bank’s official nominal effective exchange-rate index has risen 0.8 percent in 2014, set for a third year of gains. The yen fell to an almost seven-year low after the BOJ raised its annual target for expanding the monetary base to 80 trillion yen ($701 billion).

Singapore policy makers “kept the modest appreciation stance -- I thought they should be leaning more dovish, because you’ve got headwinds to growth in region,” Win Thin, the global head of emerging-market strategy at Brown Brothers Harriman & Co. in New York, said by phone today. “Now you’ve got the weak yen story. I’d have thought a more appropriate response would be to move to at least a neutral policy.”

View the full report here.

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