The benchmark three-month interest rate in Singapore fell for a third straight session on Thursday (Apr 16), dropping below the psychological 1 per cent level amid an improved outlook for the local dollar.
At the latest fixing on Thursday, the three-month Singapore interbank offered rate (Sibor), which is used to set floating-rate mortgages, slipped to 0.94654 per cent from 1.01241 per cent on Wednesday. This is the lowest level in about a month.
The Monetary Authority of Singapore (MAS) surprised financial markets on Tuesday by keeping monetary policy unchanged, sparking a rally in the Singapore dollar. The majority of forecasters had expected MAS to let the local dollar weaken slightly against a basket of currencies – either by widening the policy band in which the Singapore dollar trades or by recentering the midpoint of the band.
A softer Singapore dollar puts upward pressure on local interest rates as investors seek higher yields as compensation for holding the weakening currency, while a stronger currency helps keep interest rates down.
MAS’ current stance is to allow a modest and gradual appreciation of the Singapore dollar to keep in check cost pressures arising from the tight labour market in the medium term.
Source : Channel NewsAsia – 16 Apr 2015
