Singapore's Year on Year inflation as at January 2008 was 6.6%, up from 4.4% in December 2007. (Source : http://www.mas.gov.sg/eco_research/eco_dev_ana/Inflation_Monthly.html)
While the world frets about a possible U.S. recession, global inflation has quietly climbed to historic levels, confronting policy makers with tough choices that could end up hurting the euro and lifting Asian currencies.
At a time when global growth is slowing and prices are rising, a strengthening currency can help protect consumers by increasing their buying power.
(Source : http://banderasnews.com/0802/nw-globalinflation.htm)
In recent reports, Monetary Authority of Singapore is set to strengthen Singapore Currency further and may meet exchange rate of $1.32 against US$ by year end (2008). Stronger Singapore Dollar can help lower inflation as it will cost lesser to import from other countries.
However, adjusting the currency is a double edge sword. With stronger Singapore Dollar, our exports becomes less attractive. Singapore's export are already facing competition from developing nations, where labour cost are much lower, which helped lower cost of exports.
As such, the Monetary Authority will be watchful on how far the currency appreciates in value so that we do not end up edging ourselves out of global competition.
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