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.