Asian currencies mostly down; baht hits new 10-month low
Asian currencies mostly down; baht hits new 10-month low
SINGAPORE (Dow Jones): Asian currencies were mostly weaker late Monday, undermined by the dollar's strength against the yen, dealers said.
Concerns were increased the prospect of widening interest rate differentials between Asian currencies and the dollar Surprisingly robust U.S. second-quarter economic growth has renewed concerns that the Federal Reserve may raise rates at its next policy meeting on Aug. 22.
Evidence in recent weeks pointing to an economic slowdown had led the market to lower its expectations of a rate hike next month. But now, market participants are revising their expectations, while awaiting the release of more key economic data this week. The U.S. economy grew 5.2 percent between April and June, far above an expected 3.9 percent growth rate.
Following last week's relentless selldown, the Thai baht continued to bear the brunt of the region's weakness, as it tumbled to a fresh 10-month low of 41.615 baht to the dollar in early trading.
Heightened political anxieties ahead of Thailand's general elections later this year and the central bank's unruffled reaction so far to the baht's weakness have provided traders with an incentive to hammer the baht.
In late trading, the dollar was at 41.475 baht, up from 41.225 baht late Friday.
The baht will likely test technical resistance around 41.65 baht-41.70 baht soon, which would be the lowest level since September 1999, but will initially find it difficult to break below this level, a dealer at a U.S. bank said.
"It's an important level on the chart," the dealer said.
The Indonesian rupiah, the New Taiwan dollar and the South Korean won were slightly lower, while the Philippine peso was marginally firmer after recovering in late trading. The Singapore dollar was steady.
The Indonesian rupiah had weakened earlier in the day on mounting political uncertainties ahead of the country's national assembly and on the weaker baht, dealers said.
But the rupiah had regained some strength late in the day after the government signed a letter of intent with the International Monetary Fund, which will pave the way for the next disbursement of funds under a $5 billion bailout program.
In late trade, the dollar was at Rp 8,965, up from Rp 8,935 late Friday and down from Monday's intraday high of Rp 9,030.
Market participants, meanwhile, will be closely watching a meeting of the country's top political leaders, scheduled to take place Tuesday in Yogyakarta.
At this stage, it is unclear if Vice President Megawati Sukarnoputri will attend the meeting. Her absence could scuttle plans to cool political tensions ahead of the People's Consultative Assembly session, which begins next Monday.
Currency watchers said that while fears that Abdurrahman, more popularly called Gus Dur, would lose his political grip have waned, the rupiah nonetheless appears set to yield to further weakness this week as the political pressure mounts.
"We have little doubt that the Indonesian risk is very high, but nevertheless probably overstated," said Bank of America in a report, following a visit by some of its analysts to Jakarta late last week.
"The president should neither be voted out at the National Assembly, nor should the impeachment process be set in train," the bank said. "There will be rumors, and inflammatory statements from both sides."
"Short-term tactics suggest long dollar positions will be most profitable this week," the bank said, adding, however, that the dollar will likely be capped around Rp 9,200 this week.
In Manila, the dollar was at 44.825 pesos, down from Friday's close of 44.875 pesos.
The New Taiwan dollar slipped on outflows of local investment funds, with Taiwan's stock market in the doldrums, dealers said. The U.S. dollar closed at NT$31.067, up from the previous close of NT$31.046.
In South Korea, the dollar finished at 1,116.70 won, a touch higher from Friday's close of 1,116.60 won.
Against the Singapore dollar, the U.S. currency was at S$1.7330, little changed from S$1.7322 late Friday.