ASEAN currencies stop tracking yen
ASEAN currencies stop tracking yen
SINGAPORE (Dow Jones): After weeks of mirroring the yen's
every move, Southeast Asian currencies broke step with the
Japanese currency yesterday.
Scenting a weaker monetary policy stance from the Malaysian
government, offshore funds took the opportunity to hammer both
the ringgit and the Singapore dollar lower, even as the yen
remained relatively stable.
Both currencies fell through key support levels, with the U.S.
dollar rising to within a whisker of 4.20 ringgit, its highest
level since the beginning of February. Against the Singapore
dollar the U.S. currency rose to nearly S$1.72
In response to the falls, the baht was also pushed lower
against the U.S. dollar. The rupiah and the Philippine peso,
however, both managed to claw their way higher.
The foreign exchange market had been on the alert for any
signs of a softening in Malaysia's monetary policy ever since it
was announced last week that Daim Zainuddin, a close ally of
Prime Minister Mahathir Mohamad, was to be appointed to the
cabinet as a special minister with responsibility for economic
development.
The move was widely seen as strengthening the hand of
Mahathir, a vocal monetary policy dove, over that of his hawkish
deputy Anwar Ibrahim.
The Singapore dollar also became a target because it is more
liquid than other regional currencies, making it easier to trade,
and because lower interest rates mean it is cheaper to borrow to
sell short.
There are good fundamental reasons to sell the Singapore
dollar should the ringgit weaken, however.
"The market perceives that the authorities will maintain the
value of the Singapore dollar on a trade-weighted basis. Since
Malaysia is Singapore's largest trading partner, if the ringgit
weakens, then so must the Singapore dollar," explained Raha at
Citibank.
The market brushed off a batch of ex-budget economic stimulus
measures announced late Monday in parliament by finance minister
Richard Hu.
A downward revision of the government's 1998 economic growth
forecast to 0.5 percent to 1.5 percent from 2.5 percent to 4.5
percent previously held few surprises for traders.
Some market participants, however, did point to Hu's claim
that the Singapore dollar had actually appreciated against a
trade-weighted basket of currencies as evidence that the
Singapore currency has further to fall, with Brooks at Santander
predicting a year-end level for the U.S. dollar of S$1.85.
The falls in the ringgit and the Singapore dollar also helped
to weaken sentiment towards the baht, already undermined by
ministerial promises of lower short term interest rates.
Late in the Asian day, the U.S. dollar was quoted at 42.3750
Thai baht, up from 41.6050 late on Friday.
The Philippine peso, however, ended higher, boosted by the
firmer tone of the Japanese yen. At the end of domestic trading
the U.S. dollar was quoted at 41.90 peso, down from 41.97 peso on
Friday.
In North Asia the won also edged higher in line with the yen,
with the U.S. dollar ending trading at 1,383 Korean won, compared
with 1,386 won on Friday.
Against the new Taiwan dollar, the U.S. currency closed at
NT$34.551, down fractionally from NT$34.552 after the central
bank sold U.S. dollar to meet quarter end importer demand.