For monetary policy, the Monetary Authority of Singapore (MAS) said it would “reduce slightly” the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER).
That means the local currency will likely weaken or strengthen at a slower pace, which typically helps to boost exports.
“(The) easing decision suggests that the paramount priority for the MAS is to support growth in this significantly uncertain global trade with a lack of clarity regarding tariff directions,” HSBC Global Research said in a report.
MAS took a measured approach because it meets four times a year instead of twice, which was the case before 2024.
“Higher frequency of meetings gives the MAS the flexibility to adjust its monetary settings in a timelier manner, particularly in a world lacking clarity on tariff directions,” HSBC said.
It added that MAS took a “dovish” tone, suggesting that the central bank remains open to further easing of policy.
Ms Ling of OCBC similarly said there is room for further monetary policy easing if economic conditions worsen.
“The rhetoric is clearly dovish with reference to the output gap turning negative and the downside inflation risks,” she said. MAS lowered its core inflation forecast to 0.5 per cent to 1.5 per cent for 2025.
SINGAPORE DOLLAR OUTLOOK
Despite the actions by MAS, the Singapore dollar is likely to remain relatively strong, analysts said.
HSBC said the currency rebounded after the US dollar index fell, and the S$NEER rose after MAS released its monetary policy statement.
“All in, we think it is difficult to have a bearish SGD trade idea at this juncture,” the bank said.
Mr Christopher Wong, an FX strategist at OCBC, said he expects the Singdollar to trade between 1.31 and 1.325 against the greenback.
Given the implication of Trump’s tariffs on growth, trade and sentiments, as well as potential MAS policy easing, the Singapore dollar is likely to weaken against the US dollar for 2025.
However, if the Euro and Chinese yuan recover, or the US dollar persists in weakening, then that would support the Singapore dollar, he said.
