SE Asian currencies fall but recover<\/p>\n
SINGAPORE (Dow Jones): Southeast Asian currencies are weaker
\nacross the board late in Asian trading yesterday compared with
\nlevels seen late Friday, but have recovered from lows against the
\nU.S. dollar reached yesterday morning.<\/p>\n
Regional currencies moved sharply lower early yesterday after
\nthe U.S. dollar surged against the Japanese yen, reportedly on
\nstrong U.S. dollar interest from U.S. investment banks and a
\nlarge U.S. insurance company.<\/p>\n
The dollar broke above the psychologically important 140 yen
\nlevel as the market opened in Tokyo, triggering stop-loss buying
\nall the way up to 140.71, from 139.78 yen immediately before the
\nbig move.<\/p>\n
The yen's retreat dragged regional currencies down in its
\nwake. The U.S. dollar broke through Singapore dollar resistance
\nat S$1.7000, and smashed through resistance in the Malaysian
\nringgit at 4.000 ringgit (MYR).<\/p>\n
Monday afternoon, traders were looking to London for
\ndirection, according to Daniel Lian, head of Asian markets
\nresearch for ANZ Investment Bank in Singapore.<\/p>\n
"There was pretty choppy trading in the morning, but when
\nLondon opened and didn't take the yen down further, regional
\ncurrencies consolidated," he said.<\/p>\n
Lian says that traders in the interbank market are watching
\nthe yen closely for cues on trading regional currencies.<\/p>\n
"They are only willing to pressure the regionals if dollar\/yen
\nis on their side. Otherwise the cost of a short position is too
\nmuch to maintain."<\/p>\n
It is all up to the yen. If it continues to go, then so will
\nSoutheast Asian currencies. If the yen turns around, regional
\ncurrencies will too," Lian said.<\/p>\n
He said that large hedge funds had placed short positions
\nagainst regional currencies several weeks ago, before the crisis
\nin Indonesia forced President Soeharto from power and sent
\nregional currency markets into a tailspin. Interbank traders,
\nhowever, are not sitting on such old short positions.<\/p>\n
Using the ringgit as an example, Lian said that forward
\npremiums (which can be used as a measure of the price of shorting
\na currency) two months ago implied a depreciation of about 15
\npercent. Now, the six-month forward rate implies a depreciation
\nof 25 percent-26 percent, making it much more expensive to place
\na new short position against the ringgit, Lian said.<\/p>\n
In the afternoon, the U.S. dollar was quoted at 3.9975
\nringgit, up from 3.9870 ringgit late Friday in Asia.<\/p>\n
Fears<\/p>\n
Nicholas Brooks, the regional economist for Southeast Asia for
\nBanco Santander, said regional currencies are trading on market
\nplayers' fears of how far the yen will drop, as well as their
\nfears about where it will turn around.<\/p>\n
Brooks said that dealers will be watching the meeting of the
\ndeputy finance ministers of the Group of Seven industrialized
\nnations in Paris on Tuesday.<\/p>\n
"People sense that not much is going to be done at the G-7
\nmeeting, but the question is if they will make stronger comments
\nthan they had intended because of the scale of the yen's recent
\ndepreciation," he said.<\/p>\n
The Australian dollar plunged towards an all-time low
\nyesterday after U.S. and other hedge funds renewed their attack,
\nforcing the currency through the crucial 60 U.S. cent level.<\/p>\n
Dealers and economists said the funds were using the
\nAustralian currency as a substitute for attacking Asian
\ncurrencies that were too illiquid to sell.<\/p>\n
They said the U.S. dollar's rise past 140 yen yesterday
\ntriggered the latest wave in the assault, which has pushed the
\nAustralian dollar down nine percent in the past month.<\/p>\n
The Australian dollar stood at U.S.$0.5970\/80 at 2.45 p.m.
\n(0445 GMT), down from its U.S.$0.6080 open in New Zealand and
\nwell below U.S.$0.6550 on May 1.<\/p>\n
It was also below its previous 12-year low of U.S.$0.5985
\nreached in late Friday trade in New York.<\/p>\n
The Australian dollar touched U.S.$0.5959 in late July 1986
\nafter then-Prime Minister Paul Keating's predicted Australia
\ncould become a "banana republic" because of a blowout in its
\ncurrent account deficit.<\/p>",
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