Asia currencies drag their feet as yen steps up
Asia currencies drag their feet as yen steps up
SINGAPORE (Reuters): Asian currencies dragged their feet yesterday as the benefits of a strong yen were tempered by demand for cheaper dollars.
News of a long-delayed Malaysian bank merger and Indonesia's apparent commitment to its IMF reform agreement kept regional currencies well underpinned, but dealers said the dollar continued to be sought on dips.
The Asian Development Bank's (ADB) annual report was largely ignored by the sleepy market.
The ADB said Asia's battered economies would start to recover next year, but would take several years to return to pre-crisis growth rates.
The ADB said Indonesia, Thailand and South Korea would see their economies shrink this year while Malaysia and the Philippines would grow at a much slower rate.
In Malaysia, the ringgit pulled off its lows as the stock market gained from overnight news of a deal between RHB Bank and Sime Bank.
Rashid Hussain Bhd said it would pay 368 million ringgit for Sime Bank's net tangible assets.
Deputy Prime Minister Anwar Ibrahim said he was happy with the finalization of the deal, which had appeared on the verge of falling through before Wednesday's announcement.
The Indonesian rupiah clambered back above the 8,000 per dollar level on commercial dollar sales near its lows of 8,200.
Dealers said increased offshore placements in central bank paper (SBIs) had lifted the rupiah and short-end swap rates.
In Jakarta, the rupiah closed at 7,925 against the American greenback yesterday after it touched a day low of 8,200.
Local dealers attributed the failure of the rupiah to strengthen to persistent demonstrations by university students demanding President Soeharto make rapid economic and political changes or step down.
"Investors are greatly worried that student demonstrations will spread to the streets in the coming days causing activities to halt," the dealer said.
In Thailand, the baht hovered around the 39.00 per dollar level for most of the day, sandwiched between corporate dollar demand and offshore offers.
In Hong Kong, a government financial review said the local dollar's peg must be maintained and interest rates remained the most potent weapon for defending it, despite the hardship inflicted on residents.
The Hong Kong dollar was steady while forwards remained soft on low short-term rates and the yen's strength.
The Singapore dollar slipped from its highs but held up after breaching the 1.5850 barrier on stop-loss U.S. dollar sales.
The Philippine peso slipped on dollar buying in the parallel foreign exchange market.
Dealers said foreign funds were shifting their portfolios out of Philippine markets ahead of the May 11 presidential election, which Vice President Joseph Estrada is tipped to win.
The South Korean won gained from the yen's rise, which spurred banks to square long dollar positions though concerns about possible labor unrest lurked in the background after a militant union threatened to boycott talks with the government and business.
The Taiwan dollar rose with the yen and on investor wariness the central bank might defend it in the face of pressure from recent data showing a falling exports trend.
In London, the dollar rose against the yen after Tokyo cooled speculation of intervention to support the currency and London stocks recovered from a lackluster start after soothing UK retail sales data.
The dollar recovered early in Europe to 130.45 yen from an earlier low of 129.91 but it was still marginally below Wednesday's late European trading level.