SINGAPORE DOLLAR

Mr J.B. Jeyaretnam asked the Minister for Finance whether he is of the view that the strength of the Singapore dollar may be a contributing cause for the present downturn in Singapore's economy and if it is, does the Government propose to do anything about it.

Dr Hu Tsu Tau: The strength of the Singapore dollar is not responsible for the present downturn in the Singapore economy.

In general, in the absence of foreign exchange controls, the exchange rate of a country's currency is dependent on the country's balance of payments, its foreign exchange reserves, and the direction and magnitude of capital and monetary flows.

Over the past decade, the Singapore dollar has appreciated against most major international currencies as a natural outcome of the strength of our economy, strong capital and monetary inflows, a tight fiscal policy which led to steady fiscal surpluses, and large and increasing foreign reserves. The value of the Singapore dollar is determined by these fundamental economic parameters. The Monetary Authority of Singapore intervenes only when foreign exchange speculators distort the value beyond its normal range against a basket of currencies of our main trading partners.