Will Singapore Intervene to Hold Down the Dollar?

Singapore dollar could be kept weak in forex trading

One of the interesting things about recession — and about countries that rely heavily on exports — is that weak currencies become desirable. The Swiss have already interfered directly with the currency market to keep the franc lower in forex trading, and other countries have tried quantitative easing to help do the job. Singapore could become another country itching for a lower currency.

Singapore’s desire for a weak currency stems from its place as a global exporter. A weaker currency gives Singapore an edge in the export game, since it helps keep the prices of its products lower. Ideas of modest economic recovery, however, mean that some forex traders are looking to emerging market currencies, buying them up and adding strength.

Singapore is concerned about this turn of events, and as a result, the central bank is considering direct intervention in the currency market. Singapore monetary officials have set a level (S.4690) at which the central bank will begin buying up U.S. dollars in order to keep the Singapore dollar lower.