Wai Ho Leong, senior regional economist at Barclays Capital in Singapore, comments on the outlook for the Singapore dollar in a research note released today after the government reported industrial production rose for the first time in three months in June.
The U.K. bank forecasts the currency will strengthen 1.1% to $1.19 per dollar in 12 months.
“Against the backdrop of upside inflation risks but moderating growth, we believe the Monetary Authority of Singapore will maintain its current stance of gradual appreciation of the Singapore dollar’s nominal effective exchange rate in its October policy statement.
The U.K. bank forecasts the currency will strengthen 1.1% to $1.19 per dollar in 12 months.
“Against the backdrop of upside inflation risks but moderating growth, we believe the Monetary Authority of Singapore will maintain its current stance of gradual appreciation of the Singapore dollar’s nominal effective exchange rate in its October policy statement.
“If MAS core inflation consistently surprises on the upside, we believe there is an outside chance that MAS may tighten policy further by re-centering the Singapore dollar’s NEER band upwards.
“We expect growth to moderate to 4.5% in 2012 as the effects of tighter monetary conditions and weaker external demand are felt. However, the moderation is likely to be in the form of a soft landing, as growth remains broad-based in general and of higher quality due to a tight labor market.
“On a full-year basis, we believe the economy is still on track to achieve our GDP growth forecast of 6.0% in 2011.”
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