Singapore dollar approaching band limit after recent slide

Blame it on the yuan depreciation.

Singapore’s dollar slid to a six-year low after China’s central bank reduced its reference rate for the yuan by the most since August. Barclays Plc said further declines are set to slow as the island-state’s currency is probably close to the bottom of the central bank’s policy band, according to a report by Bloomberg.

The Monetary Authority of Singapore guides the local dollar against an undisclosed basket of currencies of its major trading partners and competitors. The currency is “pretty close to the bottom end of the band” based on Barclays’s calculations, said Mitul Kotecha, the bank’s Singapore-based head of Asia currency and rates strategy.

“The Singapore dollar is one of the currencies that’s more susceptible to a depreciation of the yuan,” Kotecha said. “I’m a bit more skeptical of further sharp declines in the Singapore dollar given the fact that we’re already where we are trading relative to the band.”

Read the full report here.