Most Asian monies fall against US dollar<\/p>\n
HONG KONG (Dow Jones): The won surged to its highest level in
\nover two months Thursday after the South Korean government
\nannounced an extensive package of measures aimed at stabilizing
\nthe country's shaky financial markets.<\/p>\n
Other Asian currencies fared less well, falling back against
\nthe dollar as the U.S. currency bounced higher against the yen in
\nresponse to a rally in U.S. asset markets.<\/p>\n
The Korean government's announcement that it will inject
\ntrillions of won into investment trust companies faced with mass
\nredemptions following the financial collapse of the Daewoo Group
\ntriggered what observers described as a powerful relief rally in
\nthe local currency.<\/p>\n
Won-buying by both domestic and international market players
\nforced the U.S. currency down steeply as the Seoul stock market
\nleapt by 2.8 percent.<\/p>\n
From 1,193.00 won at the open, the dollar tumbled to an
\nintraday low of 1,184.40 won, its weakest against the won since
\nSept. 3, before pulling back slightly in late trading to end the
\nsession at 1,184.90 won.<\/p>\n
At Wednesday's close, the won was quoted at 1,191.90 won.<\/p>\n
The won's rally was reinforced by the government's pledge to
\nbuy unlimited amounts of bonds from investment trusts on demand
\nand to maintain interest rates at current single-digit levels.<\/p>\n
\"The important thing here is that the government is trying to
\nstabilize the financial markets\" to avert an asset price spiral,
\nsaid Chris Tinker, head of fixed income research at Credit
\nLyonnais Asia in Hong Kong.<\/p>\n
Other analysts agreed, saying the government's move to absorb
\nmuch of the risk of Daewoo's bad debt is positive for the South
\nKorean economy and for the won.<\/p>\n
\"The weakness of Korea's financial market is acting as a
\nbottle neck which is threatening to drain the whole recovery
\nprocess,\" said Steven Xu, treasury economist at Standard
\nChartered Bank in Hong Kong. \"The government has no choice, but
\nto nationalize the debt.\"<\/p>\n
Elsewhere Asian regional currencies failed to match the won's
\nadvance.<\/p>\n
In Taipei the New Taiwan dollar slipped back, ending an
\nextended unbroken bull run.<\/p>\n
Traders blamed the local currency's fall on the 1.5 percent
\ndecline in the Taipei stock market, coupled with continued U.S.
\ndollar purchases by the central bank.<\/p>\n
None doubted, however, that the New Taiwan dollar would resume
\nits upward trend in the near future.<\/p>\n
According to Xu at Standard Chartered, the authorities'
\nrepeated foreign exchange market interventions to suppress the
\nNew Taiwan dollar's appreciation have injected so much liquidity
\ninto Taiwanese money markets that the central bank is finding it
\nimpossible to absorb the excess through debt issuance.<\/p>\n
As a result domestic overnight interest rates have fallen
\nbelow the central bank's target rate of 4.8 percent.<\/p>\n
\"The central bank doesn't want interest rates to fall any
\nfurther, but it can't target both the interest rate and the
\nexchange rate,\" Xu said. \"It will have to allow the currency to
\nappreciate.\"<\/p>\n
Stripped of the central bank's support, the U.S. dollar will
\nfall \"rapidly\" to NT$31.50 and then to NT$31.00, Xu predicted.
\nAt Thursday's close the U.S. currency was at NT$31.732, up from
\nNT31.722 the previous day.<\/p>\n
In Southeast Asia, the Indonesian rupiah lost ground despite a
\nsharp rally in local stocks powered by thawing relations between
\nJakarta and the International Monetary Fund.<\/p>\n
Despite market talk of substantial flight capital
\nrepatriation, dollar sales were outweighed by demand for the U.S.
\ncurrency from Indonesian corporations and from market players
\nlooking to exit short positions.<\/p>\n
Late in Asian trading, the dollar was quoted at Rp 6,800, up
\nfrom Rp 6,735 the day before.<\/p>\n
Southeast Asia's other currencies maintained their recent
\ntight ranges.<\/p>\n
Late in the day, the dollar was quoted against the Thai baht
\nat 38.6900 baht, down a fraction from 38.6950 baht the previous
\nday.<\/p>\n
Against the Singapore dollar, the U.S. currency was at
\nS$1.6660, down from S$1.6682 the day before.<\/p>\n
Against the Philippine peso the dollar closed at 40.095 pesos,
\ndown from 40.120 pesos at the end of Wednesday's session.<\/p>",
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