Singapore pushes currency up to counter dollar inflation

SINGAPORE, October 14, 2010 (AFP) – Singapore on Thursday announced a surprise move to tighten monetary policy, pushing the local dollar to new highs as the economy headed for 13 to 15 percent expansion this year. The Monetary Authority of Singapore (MAS) signalled its anti-inflation stance after government data showed the economy expanded an annual 10.3 percent during the third quarter.

The Ministry of Trade and Industry said this meant Singapore was on track to achieve its blistering growth in 2010 after last year’s 1.3 percent contraction caused by the global recession.

Growth in the July-September quarter was slower than the 19.6 percent expansion in the previous three months, but this was widely expected because of the exceptional expansion in the first half of the year.

The MAS said that while gross domestic product growth was slowing to a “more sustainable pace”, domestic cost pressures are rising due to the “high level of resource utilisation” and tight labour market in particular.

“Thus, the balance of risks is weighted towards inflation going forward,” the central bank added.

Singapore’s monetary policy is conducted via the local dollar, which is traded against a basket of curren