MAS likely to tighten policy in April - Scotiabank

The Monetary Authority of Singapore is set to meet next week. According to a Scotiabank, the MAS is expected to sound hawkish and raise the slope of its S$NEER policy band from the current zero percent. MAS might prop up the SGD and the S$NEER afterwards. The S$NEER is currently trading moderately above the middle of the MAS S$NEER policy band, according to Scotiabank’s estimate.

Inflation and growth outlook of Singapore are believed to be supportive of a modest and gradual appreciation in the S$NEER from April onwards. MAS core inflation rose to a 10-month high of 1.7 percent year-on-year in February from 1.4 percent in the earlier month, mainly because of higher services and food inflation.

In the meantime, the city-state’s manufacturing PMI rallied to 53 in March, implying persistently expanding factory activity on a monthly basis. Moreover, the SGD has been running a tight correlation with the EUR and JPY for a long time. The prospect of ECB and Bank of Japan tapering  might stimulate the EUR and JPY respectively in the medium term, while being a drag on the DXY Index together with hovering US-China trade disputes, noted Scotiabank.

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