Singapore surprises markets by moving to zero appreciation policy

The Monetary Authority of Singapore surprised markets on Thursday by shifting its exchange rate policy, leading to weakness in currencies across the Asia Pacific region.

MAS announced it had switched to a neutral policy of zero per cent appreciation of the Singapore dollar, as a result of the economic slowdown in the country.

Policymakers at the MAS warned that the "Singapore economy is projected to expand at a more modest pace in 2016 than envisaged in the October policy review".

The city is considered by some analysts to be a bellwether for the wider region.

Only 6 out of 18 economists tracked by Bloomberg had anticipated the move.

Thursday's decision marked the first time MAS had adopted such a policy stance outside of a recession and the first time since 2008 that it had opted for a zero appreciation policy, Jim Reid at Deutsche Bank pointed out in a research note sent to clients.

Singapore's dollar fell by 0.9% following the decision.

Acting as a backdrop, the People's Bank of China set its daily fix for the country's currency, the yuan, 0.46% weaker.