Asian Currencies Down Late; Market Wary Of Intervention
Asian Currencies Down Late; Market Wary Of Intervention
Dow Jones
Singapore
Asian currencies followed the yen lower on Wednesday, with market
players remaining wary of provoking intervention by regional
central banks.
The South Korean won initially proved the exception as equity
related dollar selling by foreign investors pushed the U.S. unit
to an intraday trough of 1,190.7 won. Foreign investors snapped
up local shares for a 10th session, ending as net buyers of 155.9
billion won of stocks.
But the Bank of Korea intervened to support the dollar, buying
the currency at the 1,191 won level, pushing it all the way to an
intraday high of 1,196.4 won, a foreign bank trader in Singapore
said.
The dollar closed at 1,195.4 won, modestly higher from 1,194.5
won on Tuesday.
State-run banks bought as much as US$700 million-$800 million,
likely on behalf of the authorities, a Seoul-based trader said.
Foreign equity inflows have been a key factor underpinning the
strength of Asian currencies in recent days. Bank of America said
Asian stock markets, led by Taiwan and Korea, have seen equity
investments of over $1.3 billion to date in June.
However, "we remain convinced that export competitiveness is
seen as a critical goal by most central banks in the region,
especially in an environment of slowing global income," the bank
said in a research note.
"We expect most central banks to maintain a policy toward
trade-weighted weakness, and this would also entail absorbing any
large capital inflow to prevent a sharp appreciation," Bank of
America added.
Continued U.S. dollar buying related to military equipment
purchases, and also the yen's weakness, weighed on the New Taiwan
dollar, although this was partly offset by foreign inflows to the
stock market, traders said.
The U.S. unit ended at NT$34.682, up from NT$34.677 on
Tuesday.
Foreign investors bought more than NT$4 billion worth of
shares on Wednesday, although the main index fell 0.6 percent to
snap a four-session winning streak.
The Singapore dollar fell to a one-week low as market players
exercised caution on talk the Monetary Authority of Singapore had
been intervening in recent days to keep the local unit weak to
aid the city-state's flagging economy.
Singapore's foreign exchange reserves data, issued over the
weekend, appear to lend support to the speculation.
"Singapore's foreign exchange reserves grew by $2.4 billion to
$85.8 billion in May, suggesting that intervention was fairly
aggressive as trade flows were unlikely to have improved in that
month, although this is pure conjecture at this stage with trade
data not released yet," BNP Paribas said in a research note.
"Intervention to slow the ascent of the SGD (Singapore dollar)
falls into the current monetary policy stance of the Authority,
where a guarded growth outlook justifies an accommodative
monetary policy stance," the French bank added.
Intervention fears also kept the Thai baht on a weaker
footing, although this was offset by equity related dollar
selling by offshore institutional players, a trader in Singapore
said.
Late in Asia, the dollar was quoted around 41.81 baht,
marginally up from 41.79 baht on Tuesday.