Singapore Central Bank posts record loss as currency strengthens

The Monetary Authority of Singapore posted a record loss of $10.9 billion in the year through March as the strength of its currency depleted the value of investments.

The loss is the second in the central bank’s 40-year history, Managing Director Ravi Menon said at a press conference today, even after an investment gain of $12.3 billion for the period. The Monetary Authority, also known as the MAS, reported a net loss of $9.2 billion in the year through March 2009.

“We made good investment gains but when measured in the Singapore dollar, these gains were more than offset by the strength of the currency,” Menon said as the central released its annual report today. “The international purchasing power is unaffected by the strength of the Singapore dollar.”

 

The MSCI World Index advanced 11% in the year through March, helping lift the value of the central bank’s equity investments in U.S. dollar terms. The holdings were eroded by an 11% increase in the Singapore dollar during the period against the U.S. currency, the most among the 10-most actively traded currencies in Asia excluding Japan, according to data compiled by Bloomberg.

 

The Singapore dollar reached a record $1.2120 against its U.S. counterpart today. The central bank, which uses the exchange rate instead of interest rates to control monetary policy, said in April it would allow further appreciation to tame price gains, the third monetary policy tightening in a year.

 

“MAS foreign reserves serve two primary purposes in times of crises: they finance our imports from the rest of the world and safeguard the value of our currency,” Menon said. “On both fronts, it is the foreign currency value of the reserves that matters.”

 

The Singapore dollar is allowed to trade within an undisclosed band against a basket of currencies of the city’s major trading partners.