Asian currencies hold on, U.S. dollar falls out of favor

Asian currencies hold on, U.S. dollar falls out of favor

SINGAPORE (Reuters): Southeast Asian currencies held their
ground yesterday as the U.S. dollar fell out of favor after Wall
Street's historic drop overnight.

Wide spreads and thin volumes exaggerated volatility, but
dealers said most Asian currencies kept their cool after an
expected sell-off on the back of diving regional stock markets
failed to materialize.

Still, there was little respite for frightened investors as
stock markets from Karachi to Sydney reeled from the impact of
the Dow's 554-point drop, its biggest single-day point loss.

The dollar, fragile after the Dow's plunge, fell sharply
against the mark and yen during Asian hours, prompting players to
reduce their dollar holdings against regional currencies too.

"Instead of selling regional currencies due to the fall-off in
the stock markets, people were buying them and selling the U.S.
dollar instead because the Dow has fallen," said Jacqueline Ong,
regional economist at research firm I.D.E.A.

"But we're not sure whether this will be sustainable. We see
more pressure building up," she added.

The Malaysian ringgit was at 3.4150/250 to the U.S. dollar at
0930 GMT after diving to a record low of 3.4600 earlier.

Talk that a large Singapore investment house had recommended
buying the ringgit below the 3.40 to the dollar level helped prop
up the ringgit, dealers said.

"There were good names selling dollar/ringgit at 3.40/41. I
think the market's long of dollars," a European bank dealer in
Singapore said.

"I think the topside in the dollar/regionals has been seen. I
would prefer to sell on rallies," she added.

The Korean won skidded through a series of record lows,
closing at 957.60 to the dollar, the day's lowest permitted level
and nearly two percent off its previous close at 939.90.

Pressure on the won mounted after Moody's Investors Service
downgraded Seoul's foreign currency ceiling for short-term debt.

The Taiwan dollar ended at a 10-year low of T$30.80 against
Monday's T$30.510 as players were spooked by stock market sales.

The Philippine peso ended slightly higher at 35.15 to the
dollar after the central bank sold dollars through the day.

Manila traders said the central bank's efforts helped shield
the peso from the stock market's traumas. The main share index
lost 6.31 percent to end at a new four-year low of 1,740.18.

Central bank governor Gabriel Singson said the bank had asked
commercial banks to cooperate in curbing speculation against the
peso and to look at ways to lower interest rates.

The Singapore dollar was at 1.5780/95 to the U.S. dollar after
touching a low of 1.5950. Dealers said there was talk the
Monetary Authority of Singapore (MAS) had intervened in the
forward market, supporting three-month swaps.

"It looks like the MAS is expecting and also accepting a
weaker Singapore dollar. I wouldn't be surprised to see it at
1.60 or even 1.62 to the U.S. dollar," a local bank dealer said.

Dealers said the Singapore dollar was helped by a newspaper
report that one of Singapore's Big Four banks, Overseas Union
Bank (OUB), had raised short-term deposit rates by as much as two
percentage points.

The Thai baht slipped to 39.10/20 to the dollar onshore
against 38.45/38.55 late on Monday as importers sought dollars
while exporters held back from selling them in the face of the
market turmoil. The baht was at 38.95/05 to the dollar offshore.

The Hong Kong dollar dipped to 7.7310/50 to the U.S. dollar
from 7.7285/35 five hours earlier as interest rates eased after
the Hong Kong Monetary Authority (HKMA) added liquidity to the
interbank system to counter pressure on the stock market.

Traders said the HKMA offered overnight money at six percent,
one-week money at 12 percent and three-month at 13.5 percent.

Hong Kong Chief Executive Tung Chee-hwa said his government
was optimistic about the stock market, blaming Tuesday's drop on
plunging overseas markets. He also said the Hong Kong dollar was
likely to stabilize as currency speculators had retreated.

The Australian dollar pulled back from a 46-month low of
US$0.6820 as rumors of Reserve Bank intervention unnerved a very
short market.

The Aussie dollar's rebound helped the New Zealand dollar
recover from a three-year low of 0.6145.