Asian currencies mostly down; market dithers on MAS policy

Asian currencies mostly down; market dithers on MAS policy

SINGAPORE (Dow Jones): Renewed weakness in the Japanese yen pressured most Asian currencies lower late Thursday, with the Singapore dollar leading the descent as it spiraled to fresh 38- month lows, cracking a key support level along the way, dealers said.

Resisting the pressure from its regional peers, the Indonesian rupiah was steady on dollar sales by local state banks and waning corporate demand for the U.S. currency, dealers said.

The dollar ended Thursday at Rp 10,415, up from Rp 10,378 at Wednesday's close.

Dealers said the dollar will likely hold above Rp 10,400 as there is demand at this level. Resistance for the dollar/rupiah is expected at Rp 10,500.

The chance of further political tensions - after President Abdurrahman Wahid said Wednesday he would challenge Parliament's decision to impeach him in court - remains high. Parliament wants to remove Wahid after it censured him earlier this year in connection with two financial scandals.

Concerns over delayed IMF loans continue even though an IMF official said Thursday he was optimistic that the fund would send a team to Jakarta next month to review a stalled lending program. The market remains skeptical of a short-term fix.

The Singapore dollar extended its precipitous fall, sinking below the psychologically important S$1.80 support level to the U.S. currency, before rebounding on fears of intervention by the monetary authority, dealers said.

The absence of an aggressive intervention by the MAS fueled market speculation of a shift in the authority's policy stance from a mildly tightening bias to neutral, market watchers said.

At 0850 GMT (3:50 a.m. EST), the U.S. dollar was at S$1.7992, down from its intraday peak of S$1.8040, its highest level since January 1998, when Singapore was mired in a regional financial crisis.

Benign inflation and comments by Prime Minister Goh Chok Tong that he expects Singapore's economy to expand 5 percent this year - the lower end of the official 5 percent-7 percent growth forecast - added to the pressure on the Singapore dollar, market watchers said.

Singapore Telecommunication Ltd.'s takeover of Australia's Cable & Wireless Optus is also "creating a negative sentiment toward the currency," Redward said, but added that this wasn't the key factor that's driving the Singapore dollar lower.

"It's the slowing economy and lower inflationary pressures that's allowing the authority to let the trade-weighted currency weaken somewhat," he said.

The yen's fall back to below Y123 against the dollar and foreign equity fund outflows, stoked by Nasdaq's losses, dealt a blow to the South Korean won and the New Taiwan dollar, dealers said.

The dollar finished at 1,318.6 won, higher than Wednesday's close of 1,304.5 won.

With the local central bank largely sidelined, the New Taiwan dollar weakened to NT$32.757 against its U.S. counterpart, from NT$32.669 Wednesday.

Local authorities in Thailand also appeared to be tolerating the local currency's weakness.

Suggestions by senior Thai officials Thursday that the government would tolerate the baht's current weakness, as regional currencies slumped, provided market participants the greenlight to push it lower.

The Thai currency was at 44.765 baht, lower than 44.400 baht late Wednesday.

Feeling the heat from its regional peers, the Philippine currency closed at 49.355 pesos, from 49.215 pesos Wednesday.