Asian currencies down late on yen, some hit multi-month low
Asian currencies down late on yen, some hit multi-month low
Nirmala Menon, Dow Jones, Singapore
A weak yen drove Asian currencies lower late Wednesday, with some revisiting multiple month lows and breaching key barriers in the process.
The U.S. dollar continued its upward momentum against the yen in Asia, buoyed by the Dow Jones Industrial Average's 4.6 percent overnight surge.
The Singapore currency sank to yet another fresh three-month low for the third straight session as U.S. and local banks covered short U.S. dollar positions, traders said.
The local unit continued to be dogged by rumor, including speculation the Monetary Authority of Singapore would widen the currency's trading band, implying a preference for a weaker currency.
Concerns about a capital outflow persisted, fueled by speculation Morgan Stanley Capital International would re-weight Singapore stocks in its portfolio.
Currency strategists and dealers mostly dismissed such speculation as "position-talk" by market participants trying to make quick profits.
The local dollar's woes were compounded by a downgrade by Morgan Stanley of growth forecasts for the city state. The U.S. investment bank cut its gross domestic product growth forecast for 2002 to 3 percent, from 3.8 percent, and to 4 percent from 4.5 percent for 2003, citing an uncertain global environment.
The U.S. dollar broke past the S$1.7900 psychological resistance to an intraday high of S$1.7930 - another new high since June - though some traders said thin volumes helped exaggerate the sharp moves.
The dollar later gave up some of its gains and late in Asia, was quoted around S$1.7890, from S$1.7852 late Tuesday.
Vincent Low, head of foreign exchange and bond strategy for Asia at Merrill Lynch, said regional currencies appear to be trying to price in a moderation in exports growth.
"I think that's why neither the currency nor asset markets are reacting" to strong on-year exports data in some countries. "Everybody is trying to price in the peak," Low said.
Asian governments will likely prefer their currencies to weaken to remain competitive, Low said, but he added that this will have limited impact in an environment of weak external demand.
Ahead of a public holiday Thursday, the South Korean won tracked the weak yen to close at its lowest level in more than three months.
The market didn't react to Minister of Finance and Economy Jeon Yun-churl's comments on the currency.
"If the Korean won appreciates too much, that will have a negative impact on exports." In such an event, "the Korean government may use measures" to counteract the appreciation and is prepared to engage in "strong surveillance" of the foreign exchange market, Jeon told Dow Jones Newswires.
The Philippine peso closed at a near 14-month low, hurt by the weaker yen and banks covering short dollar positions, traders said.
The dollar ended at 52.650 pesos at the Philippine Dealing System - its highest close since on Aug. 9, 2001 -from 52.410 pesos Tuesday, but off an intraday peak of 52.655 pesos and well above the day's low of 52.500 pesos.
"It looks like we will be testing new levels (soon)," said a trader at a local bank, pegging 52.75 pesos as the next resistance.
The Thai baht came very close to last week's six-month low of 43.61 against the dollar.
But the dollar failed to breach the key 43.60 baht technical resistance due to profit-taking near that level late in the session, as well as selling by some exporters, traders said.
Some traders said a big market player - which was suspected to be acting on behalf of the Thai central bank - offered to sell substantial amounts of dollars around the 43.60 baht level. That discouraged other players from pushing the dollar up further.
Bank of Thailand said Wednesday its ongoing repayments on debt borrowed under an expired International Monetary Fund rescue program aren't weakening the baht.
The dollar ended the Asian session at 43.52 baht, up from 43.425 baht Tuesday, after trading within a tight 43.50-43.59 baht band intraday.
In Indonesia, the dollar again ended flat at Rp 9,015 as the central bank reportedly sold dollars to counter dollar demand by local companies and also the knock-on effect of a rising dollar against other regional currencies, traders said.
The dollar earlier Wednesday rallied to an intraday high of Rp 9,030 as foreign banks in Jakarta covered short positions, spooked by its gains against the yen.
Local companies jumped on the bandwagon later to buy the dollar for offshore debt repayment.
Bank Indonesia, however, was suspected of selling the dollar through state banks to support the rupiah.