MAS take bad positions

The Wall Street Journal said in a report that the MAS (Monetary Authority of Singapore) has recently developed a large derivatives position that reflects a heavy intervention in the market. The MAS net forward and futures positions in foreign currencies has surged to $66.6 billion in February from $26.6 billion a year earlier.

Limiting the strength in the Singapore dollar has always been the MAS policy, however I wonder how effective the policy will be now. After all, the U.S housing market is in trouble and the Iraqi War is draining money left, right and centre. That plus the fact that Singapore cash reserves is about $140 billion means that the Sing dollar will rise, come what may. There is only so much the MAS can buy before the risks outweights the benefits.

What's worse is that if the U.S dollar drop (due to the housing woes, Iraq War etc), the MAS will be struck with big bad positions. Positions they will have to get rid off at a loss, a big loss if the market turn in a hurry. I suggest the MAS be very, very careful about this.