Asian currencies mixed in thin holiday trading

Asian currencies mixed in thin holiday trading

SINGAPORE (Dow Jones): Asian currencies were mixed Thursday in holiday-thinned trade, with the Philippine central bank citing the stabilizing peso in its move to cut short-term interest rates by a half percentage point.

Regional currency trading was limited to the peso, which fell slightly, the Thai baht, which gained, and the Indonesian rupiah, which slid. Markets in Singapore, Hong Kong, Taipei and Seoul were closed in observance of the Lunar New Year.

The Indonesian rupiah closed slightly lower Thursday on dollar demand from local companies amid the absence of supply from offshore participants, dealers said.

After rising to an intraday high of Rp 9,475, the dollar closed at Rp 9,458, up from Rp 9,430 Wednesday.

Dealers said that local companies continued accumulating dollars to pay offshore debts. The absence of dollar supply from offshore participants due to the Lunar New Year holiday paved the way for the dollar to touch its intraday high, dealers said.

But, state-owned banks stepped into the market selling the dollar in late afternoon to drive the U.S. currency lower.

State-banks were believed to have sold the dollar on behalf of Bank Indonesia, dealers added.

"Trading was uneventful but dollar bullishness prevailed," said a dealer with a foreign bank.

Dealers expect the dollar to remain range-bound between Rp 9,425 and Rp 9,475 Friday as no major news is expected to provide fresh stimulus to the market.

In Manila, the Philippine Central Bank said it will lower its overnight borrowing rate to 12% effective Monday, in part because of expectations the peso will continue to stabilize in the wake of President Joseph Estrada's ouster. Central Bank Governor Rafael Buenaventura had recommended the rate cut.

Although the peso weakened slightly Thursday, it has been fairly stable since Vice President Gloria Macapagal-Arroyo took control of the government after a prolonged political crisis.

The central bank also cited lower domestic inflation and a new round of monetary easing in the U.S. as part of its justification in cutting rates to help stimulate the Philippine economy.

The dollar closed at 48.840 pesos, up from 48.350 pesos a day earlier.

"With his recommendation of a 50 basis-point cut, Buenaventura is looking for sustained foreign-exchange stability," said Mansoor Mohi-uddin, currency strategist at UBS Warburg.

"It makes sense. He's trying to take advantage of better market conditions to ease interest rates. It helps both public finances and domestic investment," he said.

The peso held up reasonably well in the face of a fresh dose of bad news on the fiscal and political fronts.

Newly appointed Finance Secretary Alberto Romulo said Thursday there is little prospect of balancing the budget before 2006 due to the lax fiscal management of the previous administration.

"We have a huge hole that we have to plug," Romulo told a news conference at which President Gloria Macapagal-Arroyo introduced her new cabinet. "It really doesn't look good but we'll do our best to straighten it out."

Macapagal-Arroyo also was hit with her first cabinet resignation. Defense Secretary Orlando Mercado said he was quitting over the appointment of Lisandro Abadia as national security adviser. He said Abadia was linked to a case four years ago involving the misuse of about billions of pesos in military pension funds.

Elsewhere, the Thai baht strengthened modestly in light dealings as few offshore and corporate players were trading the currency.

Late in Asia the dollar was quoted at 42.945 baht, down from 42.985 baht late Thursday.