While squabbling governments pull each others’ pigtails, Singapore is quietly engaging in some grown-up policymaking. By widening the trading band of the Singapore dollar against the US dollar, and modestly steepening its appreciation curve, the Monetary Authority is inviting a stronger local currency. At a time when developing nations are mostly resisting appreciation, and many developed economies are pursuing competitive devaluation through monetary debasement, this is bold. After bouncing through the echo chamber of the forex markets, it helped push the dollar to a new trade-weighted low for the year. But it is the right thing to do.

Tightening in this way may seem odd, given that Singapore’s economy has just posted a sharp quarter-on-quarter contraction, down almost a fifth. But this represents a slowdown from a dizzying rate of expansion – the city-state’s 19 per cent real year-on-year growth in the second quarter was among the world’s fastest – to a merely pulse-quickening one (10.3 per cent). Just as it did at its last policy review in April, when it moved from a policy of zero appreciation while shifting the Sing dollar’s trading band upwards, MAS has judged that the risk of inflation is greater than the risk of choking growth. That decision, in itself, is risky: non-oil exports account for more than half of Singapore’s gross domestic product, severely exposing it to swings in the global outlook. But the bottom line is that stronger currencies in the East are a key to relieving the burden of demand generation from the West. Further, by widening the Sing dollar’s trading band, thus allowing more volatility, MAS should reduce the need for intervention. That should slow the accumulation of FX reserves, and help to break down what research boutique GaveKal calls the “circle of manipulation,” where Asian central banks keep bond yields low, and liquidity rampant, by bidding up developed world assets. Singapore, in short, is doing its bit. Who’s next?