The surprise move sent the Singapore dollar to 1.3570 per U.S. dollar, its weakest since August 2010, on hedge funds selling.

Malaysia's ringgit and Thailand's baht also fell, reflecting perceived risks that the central banks of those countries could surprise with interest rate cuts later in the day.

"Bank of Thailand is a potential candidate. We see risks of a move today," said Jonathan Cavenagh, senior FX strategist with Westpac in Singapore, when asked if other central banks will ease.
South Korea's central bank is also expected to cut its interest rate, he added.

Eoin Treacy's view

In the aftermath of the Asian Financial Crisis the majority of the Asian tigers allowed their currencies to appreciate in tandem with the Renminbi and the Yen. This helped to keep inflation in check and allowed competition between countries to evolve on an even keel. Japan’s policy of devaluing the Yen has introduced an additional dynamic to the region whose effects are still being felt. Against this background the MAS’s commitment to a strong Singapore Dollar can be viewed in the same context as the US Treasury’s commitment to a strong Dollar in the last decade. 

The US Dollar completed a three-year base against the Singapore dollar last year and a sustained move below S$1.30 would be the minimum required to question medium-term recovery potential. 

The Asia Dollar Index broke downwards from a three-year range in November and while it has steadied somewhat over the last month, a sustained move above 114 would be required to question medium-term Type-3 top formation completion characteristics.