Asian currencies mixed ahead of Fed interest rate decision

Asian currencies mixed ahead of Fed interest rate decision

SINGAPORE (Dow Jones): Asian currencies were narrowly mixed
late Wednesday as investors refrained from taking large positions
before the Federal Reserve makes its decision on interest rates,
taming the U.S. dollar's movements.

The Federal Open Market Committee is widely expected to forego
another interest rate hike at its two-day meeting, which wraps up
Wednesday.

However, the market is wary of more rate tightening in August
and will be seeking clues on future Fed moves. The Fed, which has
raised rates six times by a total of 175 basis points over the
past year, is expected to announce Wednesday that there are still
inflationary risks for the U.S. economy, analysts said.

If the Fed maintains the status quo Wednesday, the U.S. dollar
may "take a little bit of relief after that," said Steve Brice, a
strategist at Standard Chartered Bank.

He added, however, that the pullback in the dollar will be
short-lived since it would provide buying opportunities in the
U.S. currency versus the Asian currencies, as the focus shifts
back to the political and economic uncertainties in the region.

In the Philippines, caution ahead of the Fed's decision
tightened dollar liquidity, in turn dragging the peso lower,
dealers said.

The dollar closed at 43.10 pesos on the Philippine Dealing
System, up from 43.02 pesos at the previous close.

Sentiment has also remained bruised following the central
bank's move Monday to replace its single-rate borrowing system
with a three-tier system, which effectively amounted to a rate
cut. The move appears to counter the central bank's recent rate
hikes in its bid to support the flagging peso.

"There are no clear signals on what the authorities'
objectives are," said Brice at Standard Chartered.
The South Korean won was bolstered by month-end dollar-selling by
local exporters.

The won is also expected to be supported in the near-to-medium
term by talk that foreign companies need to buy the South Korean
currency to pay for their stock acquisitions, following a string
of recent alliances between local and foreign companies, Bank of
America noted.

The dollar finished at 1,116.20 won, down from Tuesday's close
of 1,118.10 won.

With the dollar drifting lower after resistance around 1,122
won capped its recent rally, it is likely to slide toward 1,114
won, as declining short-term momentum indicators support further
weakness in the U.S. currency, Bank of America said.

Against the Singapore dollar, the U.S. currency had pierced
through S$1.7350 resistance late in the day on U.S. dollar-buying
by European institutions, dealers said.

Around 0925 GMT, the U.S. dollar was at S$1.7353, up from
S$1.7340 late Tuesday.

The yen's weakness also weighed on the Singapore dollar. Media
reports that Fitch IBCA would review its debt rating for Japan -
following similarly vague rumors Monday that Moody's Investors
Service Inc. would downgrade Japan's rating - had pressured the
yen. The dollar was trading at Y105.60, up from Y105.34 late
Tuesday in New York.

The Indonesian rupiah was indifferent to a rise in domestic
rates, as political uncertainties continued to damp investor
interest in the currency, dealers said.

The weighted average interest rate on one-month Sertifikat
Bank Indonesia notes rose sharply to 12.33 percent at a weekly
auction Wednesday from 11.74 percent last week.

In Thailand, the dollar was at 39.120 baht, down from 39.165
baht late Tuesday, after trading within a familiar range of
39.105 baht and 39.185 baht.

The baht ignored the resignation, which was expected, of Thai
opposition New Aspiration Party leader Chavalit Yongchaiyudh and
47 party members from Parliament Wednesday, in a bid to pressure
the government into an early dissolution of the lower house.

However, the government retains a quorum and Prime Minister
Chuan Leekpai has stated repeatedly that he won't dissolve the
house until at least October, after passage of the budget for the
year beginning Oct. 1 and other key bills.

The New Taiwan dollar finished lower as month-end demand for
U.S. dollars and a 0.7% slide in the local stock market weighed
on the local currency, dealers said. The U.S. dollar finished at
NT$30.810, compared with Tuesday's close of NT$30.790.