Asian currencies mixed as markets await Fed meeting

Asian currencies mixed as markets await Fed meeting

SINGAPORE (Dow Jones): Asian currencies ended mixed against
the U.S. dollar in choppy trading Tuesday, as cautious investors
await a decision on the direction of U.S. interest rates when the
U.S. Federal Open Market Committee meets overnight.

The Indonesian rupiah and Japanese yen languished against the
U.S. dollar, while the Korean won, Thai baht, Singapore dollar
and Philippine peso climbed higher. The New Taiwan dollar ended
the day flat.

In late trading, the U.S. dollar was trading at 106.61 yen, up
from 105.87 yen in late trading Monday, thanks to moderate gains
overnight on Wall Street.

"The market believes the Fed will raise rates either today or
in November," said a currency strategist at a U.S. bank in
Singapore. "There are also signs that growth in Europe will
prompt the (European Central Bank) to raise rates (at a meeting)
Thursday."

Despite this prospect of higher interest rates, traders and
economists expect Asia's currencies to move higher against the
U.S. dollar, given strong market sentiment, capital flows back to
the region, and a still-bubbling U.S. economy that continues to
attract Asian exports.

However, the current fortunes of Asia's trade surplus
currencies are in stark contrast to some concerns being raised
about the pace and breadth of financial and judicial reforms
across the region.

In late trading, the U.S. dollar had fallen to 1207.8 won,
down from 1,214.1 won in late Asian trading Monday. The won
climbed despite a slumping Korean stock exchange, which shed 3.3
percent Tuesday on rumors there will be more government
investigations into tax evasion and illegal fundraising by
conglomerates, or chaebol.

Desmond Supple, a regional economist at Barclays Bank in
Singapore said South Korea's problems will continue to be
compounded by the struggling financial sector, which is heavily
exposed to the Daewoo Group's $57 billion debt burden.

"Given that the value of Daewoo's assets falls far short of
its liabilities, a hole will potentially be burned into the
financial sector if it is forced to absorb these losses itself,"
he said.

The rest of Asia's regional currencies largely took their cue
from the fortunes of the Indonesian rupiah, although the Thai
baht managed to take center stage late in the session.

The Bank of Thailand announced late Tuesday that it would
impose a 50-million-baht ceiling on onshore loans to offshore
counterparties - an across-the-board ceiling that applies to all
of an institution's branches.

The surprise announcement pushed the U.S. dollar down sharply
against the baht. In late trading, the U.S. dollar was trading at
39.785 baht, well down from 40.35 baht late Monday. Nevertheless,
a trader at a Thai bank in Singapore was nonplused, saying the
rule had already been adopted by his bank and other Thai banks.

"The announcement was a good excuse to set off some stop-loss
(orders), to push the dollar to about 39.72 baht, but we expect
it to come back once the knee-jerk selling stops," he said.

Bank of Thailand announcements aside, traders said panic U.S.
dollar-selling Monday, prompted by the weekend election of
reformist Amien Rais as Indonesia's People's National Assembly
speaker, had dissipated.

Although there were still some signs of U.S. dollar-selling
early Tuesday, traders said the U.S. dollar was well-supported
above Rp 7,600.

In late trading, the U.S. dollar was trading at Rp 7,780, up
from Rp 7,710 in late Asian trading Monday.

Against the Singapore dollar, the U.S. dollar was trading at
S$1.6887, down from S$1.6910 late Monday. The U.S. dollar did
climb as high as S$1.6932 in intraday trading, with many traders
expecting the U.S. dollar to drift higher in coming sessions.

On the Philippine Dealing System, the U.S. dollar was trading
at 40.265 pesos, down from 40.56 pesos in late trading Monday.

The U.S. dollar was trading against the New Taiwan dollar at
NT$31.78, almost unchanged from NT$31.783 in late trading Monday.