Asian currencies down as stock market falls

Asian currencies down as stock market falls

SINGAPORE (Dow Jones): The drubbing on regional stock markets continued to push Asian currencies lower late Tuesday.

However, while a recovery in the yen provided a mild respite for some currencies in late trading, faltering investor confidence in the Philippines sent the peso reeling to a fresh 19-month low.

The peso will likely remain frail as long as the conflict in the southern island of Mindanao between government military forces and Muslim rebels remains unresolved and bombings in Manila continue to raise concerns over national security, market observers said.

"It's difficult to envisage any significant improvement in the short term," Bank of America strategist Simon Flint said.

The dollar closed at 42.370 pesos on the Philippine Dealing System, up 46 centavos from Monday's close of 41.915 pesos.

Earlier in the session, the dollar climbed to a fresh 19-month high of 42.375 pesos, its highest level since hitting 42.560 pesos Oct. 23, 1998.

The drop in the peso helped erode the Thai baht, although the Japanese yen's strength late in the day stemmed the Thai currency's fall, they added.

The dollar was at 39.275 baht, up from 39.000 baht late Monday.

"There was a lot of outright selling interest in the baht - buying in dollars, selling in the baht and bidding for baht swaps," the dealer at the Asian bank said. "People are concerned because of the outflow of the baht, due to the falling stock market and the problems in the Philippines."

Investors are also awaiting news from the central bank's monetary policy board, which is holding its first meeting late Tuesday.

Bank of Thailand has adopted a flexible inflation-targeting monetary policy framework, and the target range for inflation may be set at the meeting. The upward limit of the inflation target is expected to be around 4 percent.

Other Asian currencies felt the brunt of regional stock market weakness, dealers said. However, the currencies regained some lost ground as the yen strengthened in late trading, they added.

The South Korean won ended at its lowest level against the U.S. dollar in nearly 13 weeks as share prices on the Seoul stock market continued their recent downward spiral.

The dollar finished at 1,134.40 won, up from Monday's close of 1,130.60 won its highest finish since Feb. 25, when it closed at 1,136.60 won.

Against the Indonesian rupiah, the dollar rose to Rp 8,445, from Rp 8,318 late Monday. The rupiah fell in line with other regional currencies and as local companies bought dollars to service debt, dealers said.

Due to the weakened rupiah, Indonesia's domestic inflation rate is expected to creep up in May but will likely be capped below 2 percent, State Statistics Bureau Chief Sugito Suwito said Tuesday.

"If the rupiah weakens to Rp 12,000 (against the dollar), then inflation would be 2 percent, but the rupiah is unlikely to fall this far," Sugito said.

The decline in the Taiwan stock market and political tensions with China lifted the U.S. dollar, which closed at NT$30.749, from Monday's close of NT$30.709.

It was the second straight session of decline for the local dollar since the island's new government was sworn in Saturday.

Dealers said the central bank tried to limit the fall of the local dollar to around the NT$30.75 level, but offshore demand for U.S. dollars ran high because of its strength against regional currencies.

Against the Singapore currency, the U.S. dollar was at S$1.7319, up from S$1.7277 late Monday.

Dealers said they expect the Singapore dollar to continue its descent in coming days, although one said further declines could provoke intervention by the Monetary Authority of Singapore at the level of S$1.7350.