From Reuters, January 25/26:
SINGAPORE, Jan 26 (Reuters) - Singapore's central bank has a unique method of managing monetary policy, tweaking the exchange rate of its currency instead of changing domestic interest rates like many economies.The Monetary Authority of Singapore (MAS) sets the path of what it calls the policy band of the Singapore dollar nominal effective exchange rate (S$NEER), thus strengthening or weakening the local currency against those of its main trading partners.
WHY DOES SINGAPORE USE THIS METHOD?
Singapore is a small and trade-reliant economy. Gross exports and imports of goods and services are more than three times its gross domestic product (GDP). Almost 40 cents of every Singapore dollar spent domestically is on imports.That means the exchange rate has a much bigger influence on inflation than domestic interest rates.For example, an appreciation of the Singapore dollar against the currencies of its major trading partners will reduce prices of imported goods and services. This dampens the prices that households have to pay.
WHAT IS THE S$NEER?
The S$NEER is an index of the Singapore dollar's trade-weighted exchange rate against the currencies of the island's major trading partners....
....MUCH MORE
Here's the Monetary Authority of Singapore:
Frequently Asked Questions on
Singapore’s Monetary Policy
Framework
