This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SINGAPORE 002245 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ETRD SN MY CH
SUBJECT: SINGAPORE REACTS CAUTIOUSLY TO YUAN, RINGGIT 
DE-PEGS 
 
 
¶1.  The reaction in Singapore to the news that Beijing and 
Kuala Lumpur would no longer peg their currencies to the 
dollar was welcoming but cautious.  While press articles 
reflected clear relief that a politically charged issue has 
been resolved, lack of information on the details of the new 
currency regimes has muted reaction on the economic 
consequences of the changes.  The Monetary Authority of 
Singapore (MAS) moved quickly to forestall any potential 
exchange rate volatility, issuing a statement that it 
expected the impact of the moves on the Singapore dollar to 
be "small."  Traders told us that MAS intervened by buying 
perhaps USD 2.5 to 3 billion last night and today to offset 
speculative pressure on the Singapore dollar to appreciate. 
The Singapore dollar was at 1.6618 to the USD at about 5 p.m. 
Friday, up from 1.6788 at 7 p.m. Thursday,  Singapore time. 
MAS confirmed that the Singapore dollar was trading at "the 
top of the band" today, and an analyst told us that MAS had 
let the Singapore dollar breach the band and trade above it 
for some time.  MAS, said the analyst, is taking an 
incremental, cautious approach until it has a better sense of 
where the various Asian currencies will move in the next few 
days.  Traders here said the Malaysian central bank had 
intervened by buying about USD 2 to 3 billion today, as well. 
 
 
¶2.  Several analysts said that China's revaluation of the 
yuan was smaller than generally anticipated, and one analyst 
noted that the change was not so much a move from a 
dollar-peg to a managed float as a move from a dollar-peg to 
a basket-peg.  Most analysts were uncertain, however, about 
China's next move, noting that Beijing may choose to move the 
peg again soon, possibly as early as tomorrow.  Analysts in 
Singapore focused more attention on the Malaysian 
announcement; unlike Beijing, Kuala Lumpur did not announce a 
target trading range for the ringgit, raising the possibility 
that it could appreciate substantially over the next several 
weeks.  A large move in the ringgit could have significant 
consequences for Singapore; Malaysia is its largest trading 
partner, and the ringgit is widely believed to be heavily 
weighted in Singapore's own currency basket. 
 
¶3.  Comment: Overall, Singapore markets appear to be taking a 
"wait-and-see" approach to the new regimes, until the impact 
of the changes on the Singapore dollar becomes clear.  While 
a currency appreciation in two of its largest markets may be 
a boon to Singapore's exports, some analysts expect these 
close trade ties and the heavy weight of the ringgit in the 
Singapore dollar's currency basket to act as a "double 
whammy," causing a significant, eventual appreciation of the 
Singapore dollar.  End comment. 
FERGIN