Asian currencies mixed; expected lower next week

Asian currencies mixed; expected lower next week

SINGAPORE (Dow Jones): Asian currencies were mixed late Friday, with the Thai baht and the Philippine peso resuming their recent downtrend, heralding more weakness for these Southeast Asian units.

The dollar had rebounded above the 41 baht psychological resistance level, to trade at 41.225 baht in late trading, up from 40.925 baht late Thursday.

Against the peso, the dollar had risen to 44.980 peso earlier Friday, but retreated to 44.860 peso late in the day, little changed from Thursday's close of 44.865 peso.

The Singapore dollar continued its upward move after Thursday's strong gains, which were spurred by the Monetary Authority of Singapore's comments suggesting the local currency may be allowed to appreciate.

The Indonesian rupiah was marginally firmer, although it remained stuck within its recent trading range. Despite heightened political uncertainty ahead of the country's National Assembly next month, investors are hesitant to push the currency lower, with the central bank having stepped up its vigilance to deter speculation against the rupiah.

A 4.8 percent plunge in the South Korean stock market stung the won, while month-end U.S. dollar-demand from local importers helped support the New Taiwan dollar, dealers said.

Political uncertainties in several Southeast Asian countries, the dollar's strength against the Japanese yen and strong local corporate demand for the U.S. currency will continue to pressure Asian currencies next week, analysts said.

"Asian currencies will still maintain their weak tone," said Thio Chin Loo, a foreign exchange strategist at BNP Paribas.

Meanwhile, market participants are awaiting the release of U.S. second-quarter gross domestic product data due later Friday.

"Tonight's GDP will probably put to rest fears of a hard landing," said Thio.

The Thai baht's rebound Thursday proved to be short-lived when the beleaguered currency - the latest target for Southeast Asian bears - fell back below the 41 baht support level Friday, on dollar-demand from local corporates and offshore dollar-buying, dealers said. The Thai baht, which had been under heavy pressure since the start of the week, was pushed to a 10-month low Wednesday.

Amid political uncertainty ahead of Thailand's general elections later this year, many analysts expect the baht to weaken beyond 42 baht to the dollar in the next few months.

In fact, a slide toward 41.50 baht could come as early as next week, a dealer at an Asian bank said.

The Thai authorities' apparent tolerance for a weak baht had provided the catalyst for offshore investors to push down the baht, dealers said.

A Bank of Thailand official Friday denied a report that the central bank intervened in the foreign exchange market in London trading hours this week to defend the baht against speculative trade.

The baht's weakness is expected to continue dragging down the Philippine peso, which is already undermined by domestic political uncertainties and concerns over the government's yawning fiscal deficit.

In other Southeast Asian currency markets, the movements of the rupiah and the Singapore dollar were tame.

The dollar was at 8,935 rupiah, down slightly from Rp 8,963 late Thursday. Keen dollar demand around Rp 8,900 will likely keep the U.S. currency buoyed, while Indonesian state banks and offshore participants are expected to sell dollars around Rp 9,150, a dealer at a U.K. bank said.

Against its Singapore counterpart, the U.S. currency was at S$1.7322, down from S$1.7350. Participants are still smarting from the de facto central bank's unexpected announcement Thursday it was prepared to allow a modest appreciation of the Singapore dollar in relation to the currencies of its major trading partners.

Elsewhere, foreign fund equity outflows on the local stock market and dollar-buying in the non-deliverable forward market dented the South Korean won, dealers said.

The dollar finished at 1,116.60 won, up from Thursday's close of 1,113.40 won.

The won, which has been outperforming its other ailing Asian counterparts in recent months, could weaken further next week with the yen's weakness and as the stock market is pressured by concerns over the health of the country's conglomerates, said Thio at BNP Paribas.

If the dollar breaks 1,120 won, it is set to strengthen to 1,130 won thereafter, she added.

Against the New Taiwan dollar, the U.S. currency was at NT$31.050, barely changed from Thursday's close of NT$31.052.