Asian currencies battered as yen takes dive

Asian currencies battered as yen takes dive

SINGAPORE (Dow Jones): Southeast Asian currencies were battered during Asian trading on Monday, after the Japanese yen dropped to its lowest level since the beginning of December.

In Southeast Asia, the Thai baht, the Singapore dollar and the Philippine peso all ended the day lower, while in North Asian trading only heavy central bank intervention saved the new Taiwan dollar from following the South Korean won down to fresh lows for the year.

With many market participants now confidently predicting that the yen is destined to weaken further as the U.S. dollar rises toward Y125, more falls are forecast for Asia's regional currencies.

"We believe the yen will be weak at least into March, and if that is the case, it is certainly true that we will see the floating currencies in Asia weaken," said Vincent Low, foreign exchange and interest rate strategist at Merrill Lynch in Singapore.

Easing Hong Kong dollar interest rates, however, prompted some players to step into the market to sell the local currency short, with traders reporting that U.S. and U.K. banks were heavy buyers of U.S. dollars.

Activity was also heavier than normal in the Thai baht market, with Hong Kong-based participants seen by traders re-establishing short positions in the local currency, in response to the yen's fall.

Late in Asian trading the U.S. dollar was quoted at 37.725 baht, compared with 37.5250 baht toward the end of Asian dealing Friday. Should the U.S. dollar successfully test the Y125 level, say many dealers, the U.S. currency may rise to 39.00 baht or even 40.00 baht. Late Monday, the yen was around Y122.25 against the dollar.

The U.S. currency is also seen rising further against the Singapore dollar, after breaking through key resistance at S$1.7100 early Monday.

Low at Merrill Lynch believes the U.S. currency is likely to hit S$1.73 in the short term.

In a truncated session on the Philippine Dealing System the U.S. dollar pushed higher against the peso reflecting its strength against the yen.

At the close of domestic trading the U.S. currency was being quoted at PHP39.26, up from PHP38.88 at Friday's close.

Against the Indonesian rupiah, the U.S. dollar was largely static, ending the Asian day at 8,905 rupiah, compared with 8,885 rupiah late Friday.

Against the won, the dollar ended at 1,216.1 won, up from 1,204 won at the end of domestic dealing Friday. With the U.S. currency widely thought likely to break Y125, the dollar is seen appreciating further against the won to test an exchange rate of 1,250 won.

Although the New Taiwan dollar opened weaker in line with the yen and other Asian currencies, aggressive intervention by the Taiwanese central bank, which was estimated to have sold around $300 million, succeeded in pushing the local currency up to end the day higher.

After climbing to an intraday high of NT$33.45, its highest level since early October, the U.S. dollar was forced down again to finish of local trading NT$33.102, compared with NT$33.257 at the previous close.