Singapore interest rates suggest MAS change-analysts

SINGAPORE, Apr 3 (Reuters) A rise in Singapore money market rates coupled with strength in the Singapore dollar suggest the country's central bank has implemented a tighter monetary policy, analysts said on Monday.

The Monetary Authority of Singapore (MAS) holds a biannual policy review on April 11 and most traders expect it to announce a further tightening of monetary policy against a backdrop of strong economic growth.

Singapore interbank rates have been on a rising trend since late last year, pushing up short-term interest rates.

The one-month rate last month rose to about 3.1875 percent, its highest level in about five years. It was trading just below 3.0 percent at the end of 2005.

The three-month rate has risen to about 3.1875 percent, from 3.125 percent a month ago and about 3.0 percent at the start of the year.

''One-month, three-month and up to 12-month rates have risen since November,'' said Tim Condon, head of research at ING.

''The attractiveness of Singapore interest rates is the result of MAS's having implemented the move. In the statement, they are likely to announce that this has been done,'' he added.

The MAS's chief monetary policy tool is the Singapore dollar which it manages within an undisclosed trade-weighted band against a basket of currencies.

Analysts have their own estimates of the band and the Singapore dollar's movement within it.

Some say the currency has been consistently trading at 2.0 percent or more above the midpoint of the estimated band in the past few weeks, another sign the MAS is gearing up for a possible shift in monetary policy.

It has had a monetary policy stance of allowing ''a modest and gradual appreciation'' of the trade-weighted currency since 2004.

''The MAS's instrument is the trade-weighted Singapore dollar and it is trading on the strong side of the estimated policy band,'' said Condon. ''The interest rate move and the strength in the currency are a mirror image of each other.'' Dealers say a change in monetary policy next week is not a done deal and there are different views on how the MAS would tighten monetary policy if it chooses to do so.

The MAS could raise the mid-point of its currency band, increase the slope of the band or widen the band itself.

''We are pushing the stronger side of the band and the closer we get to the meeting, the more the market is likely to test how far the Sing dollar can go,'' said a trader.

''Some people are calling for no move. I think they will increase the slope of the band by 50-75 basis points.'' The Singapore dollar was about 1.6167 per dollar on Monday.

Last month, it hit its strongest level in more than seven years around 1.6126 per dollar.

REUTERS SS SND1252