Singapore dollar as funding currency: On second thought...

I wrote about the Singapore dollar as a possible funding currency for carry trades about three months ago.

From the Monetary Authority of Singapore today:

The Singapore economy has expanded at a rapid pace in 2007, underpinned by robust growth in non-IT manufacturing and asset market-related activities in the first half of the year. Going forward, while the economy is expected to moderate to a more sustainable pace, inflationary pressures stemming from external sources, as well as domestic conditions including a tight labour market and rising rental costs, will persist.

Against this backdrop, MAS will continue with the policy of a modest and gradual appreciation of the S$NEER policy band in the period ahead. However, we will increase slightly the slope of the S$NEER policy band. There will be no re-centring of the policy band, or any change in its width. In our assessment, this policy stance will remain supportive of economic growth while capping inflationary pressures and ensuring price stability over the medium term.

This announcement came on the back of an announcement from the Ministry of Trade and Industry today that the Singapore economy grew at a 6.4 percent rate in the third quarter.

Andy Mukherjee, who had written about the Singapore dollar as a funding currency back in July, has more recently highlighted the inflationary pressures facing the economy and the "good chance of a stronger Singapore dollar".