Asian currencies lose ground as won and baht forced lower
Asian currencies lose ground as won and baht forced lower
HONG KONG (Dow Jones): Asian currencies lost ground Tuesday as both the Korean won and the Thai baht dropped steeply against the U.S. dollar.
Other regional markets saw relatively quiet trading, although the Philippine peso mirrored the baht, falling back after failing to push up through a key resistance level.
The won's fall was attributed to a flurry of position covering by local market players who had earlier sold the U.S. dollar short against the local currency.
Sentiment toward the won has been upbeat in recent days, as market participants have responded favorably to the Korean government's measures to avert a systemic crisis.
Observers had feared a liquidity squeeze Thursday, when retail investors are expected to take advantage of an opportunity to redeem funds in investment trust companies exposed to debt issued by the financially stricken Daewoo Group.
But Korea's Financial Supervisory Commission said Tuesday it expects redemptions to amount to no more than between 5 trillion won to 7 trillion, well within the 17 trillion won of funding already secured by the investment trusts.
By the end of local trading the buying had driven the U.S. dollar up to 1,185.80 won, well above its earlier intraday low of 1,182.50 won and up from 1,183.40 won at Monday's close.
Dealers blamed the baht's fall on dollar purchases executed to cover short positions in the U.S. currency.
According to a senior trader at one Thai bank, speculative players in the offshore market had previously bought the baht in reaction to reports that HSBC Holdings PLC is to buy a 40 percent stake in Bangkok Metropolitan Bank, betting that the currency would appreciate on the expected investment inflow.
At levels approaching 38.50 baht, however, the dollar met firm demand from Thai corporate customers. Forced to buy dollars to exit their positions, traders caught short drove the dollar up to trigger stop-loss orders at 38.80 baht which in turn propelled the U.S. currency up to 38.9600 baht late in Asian trading.
Late Monday the dollar had been quoted at 38.7550 baht.
The dollar's potential to make further short-term gains is limited, however, according to the Thai bank trader, who said that Thai exporters are looking to sell the U.S. currency at levels above 39.00 baht.
The baht's fall was mirrored by the Philippine peso. After strengthening in early trading, the peso fell back when the U.S. dollar ran into firm customer buying interest below the 40.00 level.
By the end of the Manila trading session dollar buying had driven the U.S. currency back up to finish at 40.180 pesos, up steeply from its intraday low at 39.990 pesos and above Monday's close at 40.085 pesos.
In other regional currency markets the Singapore dollar ended flat, with little interest to trade the currency seen during Asian hours.
Late in the day the U.S. dollar was quoted at S$1.6707, compared with S$1.6705 Monday.
The Indonesian rupiah softened against the U.S. dollar, which was supported by bids from customers onshore. Foreign investors continued to hang back from the market, deterred, said traders, by Y2K-related fears and nervous at the gathering momentum of the Aceh secessionist movement.
Late in Asian dealing the dollar was quoted at Rp 6,855, up from Rp 6,805 the day before. T he New Taiwan dollar strengthened modestly despite central bank intervention, as the market reacted to October's favorable trade data, released Monday.
At the close of local trading the U.S. dollar was quoted at NT$31.758, down from NT$31.763 the previous day.