MAS brings forward disclosure of forex intervention operations to April 9

SINGAPORE – The Monetary Authority of Singapore (MAS) will disclose its first six-monthly report on its currency intervention operations on April 9, earlier than previously scheduled, to provide more timely information to financial markets amid the coronavirus-induced turmoil.

Forex intervention is integral to MAS’ management of its Singapore dollar-based monetary policy. MAS intervenes in the foreign exchange (forex) market as needed to keep the Singdollar’s value within the policy band’s boundaries. This means it will buy or sell the currency to return the value of the Singdollar to its existing confines.

MAS said in a statement on Monday that bringing forward the date of disclosure for foreign exchange (forex) intervention from July, as earlier announced, would provide more timely information to the market.

“The disclosure seeks to enhance the market’s understanding of the actions that MAS has undertaken to implement its monetary policy stance, while preserving MAS’ operational effectiveness,” MAS said in the statement.

The move will also align the disclosure with the policy cycle after MAS brought forward its April bi-annual monetary policy statement, said MAS.

MAS on March 30 announced it would ease its policy on the Singdollar by setting the currency on a zero per cent appreciation path at the prevailing lower level of its exchange rate policy band, as Singapore braces for its worst recession ever.

The Government is set to announce on Monday a third round of stimulus for the economy after two earlier packages totalling $55 billion to help households and businesses tied over the hardships wrought by the pandemic.

The forex data to be released by MAS on April 9 will include net purchase of foreign exchange from MAS’ intervention operations from July 1, 2019 to Dec 31, 2019.

“Henceforth, MAS will release the data on a six-monthly basis, on the first business day of every April and October,” it said.

To preserve the operational effectiveness of the interventions, the data on net FX purchases will be on a six-month aggregated basis, and with a three-month lag from the end of the period.

Unlike most central banks that target interest rates, MAS’ monetary policy framework is centred on managing the Singapore dollar against an undisclosed trade-weighted basket of currencies.

That basket is also known as the Singapore dollar nominal effective exchange rate (S$NEER). MAS’ foreign exchange intervention operations are focused on keeping the S$NEER within its policy band, so as to keep inflation low over the medium term.

According to the Bank for International Settlements (BIS); “In a small and open economy such as Singapore, where gross exports and imports of goods and services are more than 300 per cent of GDP and almost 40 cents of every dollar spent domestically is on imports, the exchange rate has a much stronger influence on inflation than the interest rates.”

Foreign exchange interventions are necessary to lean against market pressure, which may drive the S$NEER away from a level consistent with domestic price stability, said BIS in a report on MAS’ reserve management.

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