ForexLive Asia FX news wrap: Singapore tightens monetary policy outside a regular meeting

The Singapore dollar hit a 3-month high today on an unscheduled monetary policy tightening from the Monetary Authority of Singapore (MAS, Singapore’s central bank). This was in response to rising inflation and the MAS flagged the risk of further CPI gains ahead.

The MAS meets for regular policy meetings in April and October each year (only two). Today they surprised with a raising of the SGD appreciation slope outside one of these regularly scheduled meetings. The MAS conduct monetary policy via the SGD exchange rate rather than via interest rate adjustments. There is more explanation and detail in the Singapore bullet point post above.

Bank of Japan Governor Kuroda spoke during the session, indicating the Bank was not overly concerned with the weakening yen (see bullets above for more detail).

The data point of note during the session was for Australian inflation in the final quarter of 2021. December core (trimmed mean) came in higher than expected and in the upper portion of the Reserve Bank of Australia (RBA) target band. The band is 2 to 3% and the December core (trimmed mean) rate was 2.6%. This is the first time the core inflation rate in Australia has breached the midpoint of the RBA target band since June 2014. The RBA will note also that core inflation rose at a 3.5% annualised pace over the second half of 2021. This is well above RBA forecasts (a full percentage point above where the RBA thought it would be in 2 years time!).

The first RBA monetary policy meeting for the year is next week, Tuesday 1 February. There are calls (from some analysts) for a rate hike at this meeting but FWIW I think that is very unlikely. The RBA will put an end to its QE bond-buying program (I’ve been posting on this over the past week or so with notes from a few of the local bank researchers) next week, but rate hikes … no, not yet.

Also published today was the National Australia Bank business survey for December. Business confidence collapsed by 24 points, swinging from +12 in November to -12 in December. Business conditions, though, which do tend to be a more objective indicator (confidence is, after all, a subjective notion) were more resilient at +8 (down from +12 in November).

Major FX rates have not done a lot on a net basis. USD/JPY traded to above 114.00 but has retraced the small gain to be straddling 113.80 and little changed as I update.

USD/CHF has held its gains though, testing its overnight high circa 0.9155.

EUR/USD and GBP/USD have lost tiny points as had CAD against the USD. AUD/USD popped above 0.7170 on the CPI data release, its back now to barely net changed circa 0.7140. NZD/USD shadowed the AUD pattern in a similar magnitude range.


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