Singapore’s forex reserves being depleted to support the SGD: BofAML

The MAS has been running down its forward book.

Singapore’s forex reserves are being depleted to keep the SGD afloat. Data from Bank of America Merrill Lynch showed that the country’s FX reserves stood at US$250.7bn in February, down by about US$27bn from the high of US$278bn in June 2014.

“The MAS has been intervening to support the Singapore dollar and running down its forward book quite dramatically, which stood at US$41.8bn in December, versus $68.3bn a year ago and $106.6bn two years back,” the report stated.

BofAML believes that not re-centering the S$NEER band in April would result a further depletion of MAS FX reserves position as the S$NEER continues to test the lower bound.

“The pressure could moreover intensify if the Fed decides to hike interest rates before the next policy meeting in October,” BofAML stated.