The International Financial Market

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Since 1981, monetary policy in Singapore has been centred on the management of the exchange rate. The main objective is to promote price stability as a basis for a sustainable economic growth. The exchange rate represents an ideal intermediate target of monetary policy in the context of the small and open Singapore economy. It is rather controllable through direct interventions in the foreign exchange markets and it bears a stable and predictable relationship with the price stability as the final target of policy over the medium-term. There are several key features of the exchange rate system in Singapore.

First, Singapore currency is managed against a number of currencies with our major trading partners and competitors. This currencies are tag with weights in accordance to the importance of the country to Singapore trading relations worldwide. This feature is revised periodically to take into account of changes in trading patterns.

Second, Monetary Authority of Singapore(MAS) operates a managed float regime for the Singapore dollar. The trade-weighted exchange rate allows the currency to fluctuate within a policy band, the level and direction is announced semi-annually to the market, normally in April and October. This provides a measures to accommodate short-term fluctuations in foreign exchange markets and the flexibility in managing the exchange rate.

Third, the exchange rate policy band is semi-annually reviewed to ensure it remains consistent with the underlying fundamentals of the economy. It is constantly assess exchange rate to prevent misalignment in the currency value. The Monetary Policy Statement(MPS) is released after each review, providing information on recent movements of the exchange rate and explaining the stance of exchange rate policy. An accompanying report, the Macroeconomic Review, provides detailed information on the assessment of macroeconomic developments and trends in the Singapore economy, and is aimed at enhancing market and

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