Asian currencies mixed amid pressure on dollar

Asian currencies mixed amid pressure on dollar

SINGAPORE (Dow Jones): Asian currencies were mixed late Wednesday, as renewed pressure on the dollar helped them sustain their recent gains despite the region's grim economic outlook, dealers said.

The Federal Reserve's decision Tuesday to trim short-term interest rates by a quarter percentage point was widely expected, and had little impact on Asian currencies.

Instead, the market focused on the Fed's statement accompanying its action, which suggested that the U.S. economy hasn't responded to the central bank's attempts to spur growth. The Fed's latest move marked the seventh cut this year, bringing interest rates to their lowest level in seven years.

The Fed also indicated it was more likely to lower than raise rates in the future, saying risks were "weighted mainly toward . . . economic weakness" rather than inflation.

"The repeat of the June statement emphasized the fact that business capital spending continues to weaken, suggesting that no upturn is in sight for the high-tech industry that fuels the region's exports," Bank of America said in a report.

Repeated verbal warnings by Japanese officials against excessive yen strength did little to offset the pressure on the dollar, which slid overnight following the Fed's announcement.

At 0820 GMT (5:20 p.m. Jakarta time), the dollar was quoted at 119.69 yen, slightly higher than 119.55 yen late Tuesday in New York. The dollar was at 120.68 yen late Tuesday in Tokyo.

Meanwhile, the Indonesian rupiah closed slightly lower as local companies picked up dollars for debt repayment, traders said.

After falling to an intraday low of Rp 8,500, the dollar closed at Rp 8,600, up from its close Tuesday at Rp 8,548.

The dollar fell earlier in the morning as banks bought rupiah amid concerns over the central bank's policy to tighten liquidity in the interbank money market system.

Despite the yen's resilience, fears of central bank intervention prevented the South Korea won from breaching past 1,280 won to the dollar, dealers said.

In the case of the Singapore dollar, talk of intervention by the local monetary authority overnight kept the U.S. currency supported above S$1.7500, dealers said.

In Seoul, the dollar finished at 1,282.70 won, down from 1,283.80 won Tuesday.

The U.S. dollar's weakness against the yen and the euro failed to inspire the Singapore dollar, dealers said.

The U.S. dollar briefly received an additional boost late in the day, jumping to around S$1.7540, on the Australian government's approval of Singapore Telecommunication Ltd's A$14 billion-plus takeover bid for Australia's second-largest telecommunications group, Cable & Wireless Optus Ltd.

But the U.S. currency failed to sustain its gains, and subsequently retreated to S$1.7525, weaker than late Tuesday's level.

The Thai baht was the main beneficiary of the dollar's weakness against the euro and the yen, dealers said.

The Thai currency strengthened to 44.52 baht per dollar, compared with 44.745 baht late Tuesday.

In Taiwan, the U.S. dollar ended at NT$34.603, higher than NT$34.586 Tuesday. The U.S. dollar had touched an intraday low of NT$34.496.

Concerns over Taiwan's sluggish economic fundamentals will likely continue to weigh on the local dollar, observers said.