Singapore’s money-market rates have dropped as traders shrug off the central bank’s first monetary policy shift in five years.

The Singapore Overnight Rate Average (SORA), the de facto standard for the city’s loan products, fell to 2.08% this week, the lowest since 2022. That’s because slower lending, foreign inflows into fixed deposits and a resilient currency helped keep cash conditions ample.

The Monetary Authority of Singapore, which uses the exchange rate as its main policy tool, made a dovish pivot in January, in an operation that involved pushing down the value of the local dollar. That was expected to put upward pressure on interest rates, as traders demand higher returns for investing in a weaker currency. Those bets haven’t materialised.

Moreover, the Singapore dollar’s outperformance versus most Asian currencies this year has also pushed down borrowing costs. The city’s currency is anchored by the yuan, which has the support of the People’s Bank of China in the face of a trade war with the US.

“Singapore dollar liquidity has been flush as investors could still be holding the view over the currency’s appreciation despite the earlier slope reduction from the MAS in January, while the loan-to-deposit ratio has stayed low,” said Frances Cheung, head of FX and rates strategy at Oversea-Chinese Banking Corp.

The drop in borrowing costs comes at a crucial time for Singapore’s economy, with the MAS signalling downside risks to growth at the January policy decision. The city’s loan-to-deposit ratio has fallen from 70.5% at end 2023 to 68.2% as of January.

However, authorities would be reluctant to see a sharp drop in interest rates over the medium term as it may hinder their goal of cooling the property market, Audrey Ong, a strategist at Barclays Plc, wrote in a note on Tuesday.

For now better liquidity has translated into robust demand at bond auctions. The sale of the 2035 sovereign bond on February 26 had a bid-to-cover ratio of 2.03 times, the highest for the 10-year tenor since July 2022.