The Monetary Authority of Singapore (MAS) held a surprise policy review today, ahead of their scheduled April policy meeting. The SGD rallied on today's MAS action and analysts at TD Securities expect SGD to trade firm given the prospect of further tightening at the April 2022 meeting.

MAS surprises with an inter-meeting tightening

“The MAS acted today after data yesterday showed that core inflation printed at 2.1% YoY in Dec 2021, above the 2% rate, which we think MAS the Bank considers as an informal inflation target. The slope of the SGD NEER band was likely raised to 1.0% today from 0.5% previously; there was no change to the midpoint and width of the band.”

“The Bank shifted its inflation outlook higher and sees core inflation in 2022 at ‘2-3%’, higher than the ‘1-2%’ expected back in October 2021. Similarly, headline (CPI-All Items) inflation is projected at ‘2.5%-3.5%’, from the earlier forecast of ‘1.5%-2.5%’.”

“Going into the FOMC meeting tomorrow, we think USD could stay on the front foot due to market jitters over a hawkish Fed and would wait for better entry levels to short USD/SGD especially if MAS intervenes to weaken the currency soon.” 

“Our call for further MAS action at the April 2022 meeting should imply greater room for SGD upside over the medium-term and we expect USD/SGD to retest 1.32 (the lows in 2021) by Q2 2022.”