Asian currencies fall on Yamaichi collapse
Asian currencies fall on Yamaichi collapse
SINGAPORE (AFP): Asian currencies weakened yesterday as investors worried over a new round of volatility following the deteriorating market situation in South Korea and the collapse of Japanese brokerage Yamaichi.
Tokyo's action to avert a further escalation of the crisis after the fall of Japan's fourth largest securities firm and the revelation of IMF measures to be imposed on South Korea would determine the course of Asian units in the next few days, analysts said.
"If the measures of the IMF are seen as insufficient" to save South Korea, "then we could see chaos in the weeks ahead," said Joanne Chong, an analyst at British investment house IDEA.
Alison Seng, a regional economist at Standard and Poor's MMS, noted that "the trend of financial turmoil in Japan is extending" and the "fast action" of government would do much to prevent a contagion from battering the currencies.
At the close of foreign exchange trading here Monday, the South Korean won slid to 1,110 to the US dollar after opening around 1,055. The Taiwan dollar dropped to 32.416 after closing last week at 32.20 to the greenback.
Southeast Asian currencies fell from their closing rates of Friday, with the Singapore dollar at 1.5927 from 1.5895 to the US dollar, the Malaysian ringgit at 3.4700 from 3.4600, and the Thai baht at 39.13 from 39.00.
The holiday in Japan limited volatility in dollar-yen trading, with the yen quoted in a tight range of 126.45 to 127.00 against the dollar, before closing at 126.99, analysts said.
"Japan and Korea are the biggest economies in Asia and people are very apprehensive on what's going to happen when the markets open tomorrow in Tokyo," said Tan Kee Wee, vice-president of United Overseas Bank (UOB) Investment Research.
"I feel the (Southeast Asian) currencies are oversold ... but right now it's just wait and see," Tan added. However, dealers expected then yen to fall through the 127-yen to the dollar level when trading resumes Tuesday.
Chong said they saw the yen "touching 127.27 levels," as the currency was seen to mirror an expected plunge in the stock market Tuesday after Nikkei futures were traded last week below 500 points.
There was also sentiment that the yen should fall to 130, analysts said.
Tokyo had been swift Monday in issuing statements outlining its moves to help the finance industry in the wake of the Yamaichi collapse.
But it remained to be seen how the Bank of Japan would handle any other cases of "hidden debt" that could emerge later on, and how it could manage the merger of weak banks to stronger banks, which took time, Chong said.
"Once the skeletons are all out of the closet, we hope the Bank of Japan would have a current plan," she added.