Asian currencies mixed late, interest rate hike lifts peso

Asian currencies mixed late, interest rate hike lifts peso

SINGAPORE (Dow Jones): A surprise interest rate hike by the
Philippine Central Bank in anticipation of tighter monetary
policy in the U.S. helped the peso higher late Thursday as Asian
currencies ended the session mixed.

The Indonesian rupiah rose as fears of political instability
after a cabinet reshuffle eased, while the Korean won fell
sharply on market fears of a possible liquidity crunch at Hyundai
Investment Trust & Securities Co.

A day after traders said the Philippine Central Bank
intervened to support the peso at an 18-month low of 41.4000
pesos against the dollar, the bank lifted its overnight borrowing
rate to 9 from 8.75 percent.

Central Bank Governor Rafael Buenaventura expects the U.S.
Federal Reserve will lift its short-term interest rates 50 basis
points over the next two months.

"There is every reason to believe that the U.S. will raise its
interest rates...This could have had an impact on the exchange
rate and other financial numbers had we not raised ours," he told
reporters.

The Fed's monetary policy-setting Federal Open Market
Committee meets May 16 and analysts view a 25-basis point boost
in the federal funds rate to 6.25 percent as a near certainty.

Nevertheless, the Philippine rate hike was unexpected after
indications from Buenaventura and other officials that rates
would be stable until after the issue early next month of
inflation data for April, and the FOMC meeting.

Near the end of trade in Manila, the dollar was at 41.260
pesos, down from 41.310 pesos a day earlier. It made an intraday
high Wednesday of 41.400 pesos.

The Indonesian rupiah rebounded from a six-month low on
Wednesday of Rp 8,090 to the dollar as fears of a disintegration
of the ruling coalition in the wake of a Cabinet reshuffle eased.

Indeed, a meeting of President Abdurrahman Wahid and
parliamentary leaders, who were angered by his dismissal Monday
of Trade and Industry Minister Yusuf Kalla and Investment
Minister Laksamana Sukardi, didn't generate the fireworks that
many analysts had expected.

Senior leaders of Kalla's Golkar Party and Laksamana's
Indonesian Democratic Party of Struggle - Wahid's main coalition
partners - had raised the prospect of withdrawing from the
government, and wanted a full explanation for the firings.

But House Speaker and Golkar Chairman Akbar Tandjung said
lawmakers didn't threaten to withdraw their support for the
president at the meeting.

"There was no statement from legislators threatening to pull
out support for Gus Dur, although, they are not totally happy
with his explanation," Akbar told reporters, referring to Wahid
by his nickname.

The dollar was quoted at Rp 7,930, down from Rp 8,023 late
Wednesday.

Elsewhere, the Korean won dropped as stock prices fell 3
percent on worries Hyundai Investment Trust, a unit of Hyundai
Group, may be saddled with bigger-than-expected losses arising
from a 1998 takeover of Hannam Investment Trust Co., and a
redemption of funds invested in Daewoo Group bonds.

Korea Exchange Bank said Hyundai Group units don't have any
financial problems because the group has liquid assets exceeding
5 trillion won, while a ministry spokesman said Hyundai Motor
Co., a key component of the sprawling group, will soon announce
a foreign strategic alliance.

The dollar ended at 1,110.60 won, up from 1,108.10 won a day
earlier.

In Taipei, the New Taiwan dollar ended higher after late
intervention by the Central Bank of China to support the local
currency.

The U.S. dollar ended at NT$30.617, down from NT$30.635
previously, and was unchanged late in the Asian trading session
against the Singapore dollar and Thai baht at S$1.7060 and 38.095
baht.

The Singapore dollar closed slightly lower against the U.S.
dollar in range-bound trading on Thursday.

The U.S. dollar was quoted at S$1.7062, up from S$1.7060 late
Wednesday.

The U.S. dollar traded in a narrow range of S$1.7040 to
S$1.7070 throughout the day as factors pressuring and supporting
the local dollar were about evenly split, analysts said.

On the negative side, prospects for higher interest rates in
the U.S. and potential capital outflows from Singapore Airlines'
purchase of a 25 percent stake in Air New Zealand weighed on the
local currency.