Singapore's economy grew more than twice the pace economists estimated in the first quarter and the central bank said it would allow further gains in the currency in the third tightening of monetary policy in a year.

The Singapore dollar jumped to a record after a trade ministry report showed gross domestic product rose at an annual rate of 23.5 percent last quarter from the previous three months.
That's up from 3.9 percent in the fourth quarter, and compares with the 11.4 percent median estimate in a Bloomberg News survey of 14 economists. The central bank said separately it will allow the Singapore dollar to appreciate more.

The island's dollar has climbed 10 percent over the past year, the best performer in Asia outside Japan, as policy makers used the currency as their main tool to fight inflation. Earnings at Singapore companies including lender DBS Group Holdings Ltd. and property developer City Developments Ltd. have surged after the economy's expansion boosted demand for loans and spurred home prices to a record.

"We were taken aback by the strength of the economy in the first quarter," said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. "Still, the central bank's tightening is less aggressive than in the past" and will result in a more modest appreciation in the currency than the past two decisions, reflecting the uncertainties in the global economy, he said.

Eoin Treacy's view Singapore has long harboured ambitions of becoming the Switzerland of Asia. When compared with the Swiss Franc's performance versus the US Dollar over the last decade, the Singapore Dollar has appreciated even faster, reflecting the country's strong economic performance. The cross rate has remained largely rangebound since 2005 and the Franc is currently testing the lower side near 70 centimes. A sustained break below that level would be required to suggest that an additional medium-term period of relative strength for the Singapore Dollar is getting underway.

The pace of economic expansion makes the prospect of overheating a more pressing issue than in other countries and suggests that further tightening measures are more likely than not. The Strait Times Index found support in the region of 3000 a month ago. This area also marked the upper side of the previous lengthy range and the region of the 200-day MA. A sustained move below it would be required to begin to question medium-term scope for additional upside.

As mentioned yesterday, the healthcare sector is among the clear leaders in Singapore. The Consumer Services sector retested its 2007 peak late last year and found support in the region of the 200-day MA last month. The Oil & Gas sector is outperforming the wider market and broke upwards to new recovery highs three weeks ago.