Money changers run out of Malaysian ringgit

SINGAPORE: Some money changers in Singapore on Friday ran out of Malaysian ringgit notes after the favourable exchange rate sparked strong interest from buyers taking the chance to stretch their dollar by picking up ringgit on the cheap.

The Singapore dollar is trading at one to 2.51 Malaysian ringgit, after hitting a 14-year high against the Malaysian currency this week.

The ringgit is under pressure as Malaysia's general election looms and as investors exit emerging Asian markets for safer assets.

Sim Moh Siong, a currency strategist at Bank of Singapore, said: "I think part of the under-performance could be due to the drop in commodity prices, especially in terms of crude oil and palm oil. That seems to be an overhang on the ringgit."

Currency analysts said the ringgit could weaken further this year, on risks from Malaysia's upcoming general election.

This could push the Singapore dollar to 2.55 versus the ringgit within the year, before moderating to 2.45 by end-2013.

Saktiandi Supaat, who is head of currency research at Maybank, said: "It's a reflection also of how market participants see Malaysian assets and also the tolerance level of Bank Negara in terms of allowing some flexibility in the ringgit.

"The ringgit has fluctuated or reacted more than the Singapore dollar to Eurozone and global risks such as growth issues. The structural issues on Singapore dollar restrict the way it reacts."

Global economic uncertainty has caused investors to pull money out of riskier assets like emerging-Asia currencies as they opt for safe haven assets like the US dollar.

The Singapore dollar has also been attracting these investors.

It has appreciated 2.5 per cent against the Thai baht and Indonesian rupiah this year.

Lee Chen Hoay, an investment analyst at Phillip Futures, said: "Because of the Eurozone crisis, it has increased the risk aversion in the market. And you even see things like Switzerland and Denmark being able to issue bonds at negative yield.

"So that means investors are willing to pay more money to get less, to protect their capital. And Singapore, being the only Southeast Asian currency with triple A, has an increased appeal."

Analysts said that should the Singapore dollar continue strengthening versus the ringgit, Singapore companies with operations in Malaysia could see profits take a hit.

However, Malaysian companies with operations in Singapore may see currency gains as they repatriate profits.

2012 forecast: Economy could do better than expected

Singapore's economy may grow more than previously estimated this year, spurring inflationary pressures, a Monetary Authority of Singapore (MAS) survey of economists showed.

Gross domestic product may increase 3 per cent this year, compared with last quarter's survey for a 2.5 per cent gain, according to the median estimate of 21 economists and analysts, in a survey by MAS released yesterday.

Consumer prices may rise 4.2 per cent this year, they predicted, higher than the 3.5 per cent rate forecast in March.

Singapore said in April it will allow faster gains in its currency to dampen price pressures, diverging from most other Asian central banks that had left borrowing costs unchanged or eased monetary policy.

The economy grew faster than initially estimated last quarter, and the Government said last month that momentum had picked up, even as downside risks persist.

"We continue to expect decent overall growth in Singapore" once the United States and China regain some momentum in the second half, said Mr Vincent Conti, a Singapore-based analyst at ANZ, in a report on Tuesday.

GDP may increase 2.8 per cent this quarter from a year earlier, compared with 1.6 per cent growth in the three months ended March, economists in the MAS survey predicted.

The Government forecasts GDP growth of 1 per cent to 3 per cent this year. The economy may expand 4.5 per cent next year, the economists said.

The MAS, which uses the exchange rate to manage inflation, said in April it will increase "slightly" the slope of the currency trading band, and raised its forecast for consumer-price gains to 3.5 per cent to 4.5 per cent this year.

It guides the local dollar against a basket of currencies within an undisclosed band and adjusts the pace of appreciation or depreciation by changing the slope, width and centre of the band.

The Singapore dollar may strengthen to S$1.243 against the US dollar by the end of this year, the economists surveyed said, from S$1.2824 as of 11.25am local time yesterday. In March, they predicted an exchange rate of S$1.23 by year-end.

The Singapore dollar has gained about 1 per cent this year, the second-best performer in a basket of 11 Asian currencies tracked by Bloomberg.

Non-oil domestic exports may climb 5.6 per cent this year, more than the 4.2 per cent estimate in the previous survey, the report showed. Singapore's export growth quickened last month as shipments of electronics and pharmaceuticals increased.

The jobless rate may climb to 2.2 per cent by the end of the year, from 2.1 per cent last quarter, the survey showed.

"Labour-market tightness remains a structural issue, as the authorities continue to put restrictions on foreign labour in the midst of close-to-full domestic employment," Mr Conti said.

"This is part of the Government's shift to a productivity driven rather than labour-driven growth model, but adds to inflation risks in the short run."

The Singapore dollar may strengthen to S$1.243 against the US dollar by the end of this year.

Singapore economy to slow to 3% in 2012: MAS survey

SINGAPORE - Singapore's economy will grow by 3.0 per cent in 2012, slowing from an expected 5.2 per cent in 2011 as the global economy and financial services sector cool, according to central bank's survey of private economists released on Wednesday.

The median forecast is at the upper end of the government's growth forecast range of 1-3 per cent for 2012.

The survey also expects the Singapore dollar to strengthen to $1.23 against the US dollar by the end of 2012 from an estimate of S$1.28 by the end of the year. It traded around $1.31 at 0300 GMT.

Asian economies have slowed in recent months, hurt by the euro zone debt crisis that has resulted in weaker demand for the region's exports.


The survey showed that growth in financial services sector in Singapore, which is one of Asia's biggest wealth management centre, is expected to slow to 4.2 per cent in 2012 from a forecast of 9.4 per cent in 2011.

According to the Monetary Authority of Singapore's (MAS) latest Survey of Professional Forecasters, economists now expect inflation in the city state to ease to 3.1 per cent next year from 5.1 per cent in 2011.

Singapore, like many Asian countries, is grappling with high inflation even as growth slows because of troubles in Western countries.

Economists in the survey have cut their forecast for this year's growth slightly to 5.2 per cent from 5.3 per cent in the previous survey in September.

Gross domestic product (GDP) growth in the October-December quarter of this year is now expected to be 4.4 per cent year-on-year, compared with 5.9 per cent in the previous survey.

For 2012, growth in financial services is expected to slow to 4.2 per cent from a forecast of 9.4 per cent in 2011.

Last month the Singapore government warned that the city-state's economy could contract in fourth-quarter growth, while 2012 GDP growth is likely to slow due to the weakness in the western economies.