Asian currencies mostly lower on U.S. interest rates outlook
Asian currencies mostly lower on U.S. interest rates outlook
SINGAPORE (Dow Jones): Asian currencies were mostly weaker
late Tuesday as financial market participants continued to buy
dollars on expectations of more aggressive interest rate hikes by
the U.S. Federal Reserve.
Leading the currencies lower was the Singapore dollar, which
was also weighed down by confirmation Keppel TatLee Bank Ltd. of
Singapore may want to buy recently closed Urban Bank of the
Philippines.
Late in the day, the rupiah was a touch weaker after it became
clear Jakarta and the International Monetary Fund hadn't yet
reached agreement on details of a new letter of intent, which
would pave the way for the disbursement by the IMF of a $400
million loan to the government.
Coordinating Minister for Economy and Finance Kwik Kian Gie
late Monday said the administration had struck an agreement with
the fund and would sign a letter of intent Wednesday. But several
government advisors told Dow Jones Newswires that an agreement
has yet been reached.
After trading as low as Rp 7,975 early in the day, the dollar
late in the session was at Rp 8,045, up from Rp 8,030 a day
earlier.
Bucking the regional downtrend was the Philippine peso, which
rose on fears of further central bank intervention in the wake of
its decision last week to lift its overnight borrowing rate to 9
percent from 8.75 percent.
But trading volumes were down ahead of a three-day Golden Week
holiday in Japan, and after most Asian markets were closed Monday
for Labor Day.
Most recent U.S. data, including gross domestic product,
consumer price index, and the key employment cost index have
showed a sharp rise in inflationary pressures in the economy.
These continue to fuel speculation the Fed could lift short-
term rates 50 basis points - rather than 25 basis points as had
been expected - when its monetary policy-setting Federal Open
Market Committee meets May 16. The federal funds rate is 6
percent, and analysts expect it could top 7 percent by year end.
The prospect of higher U.S. rates often attracts investors to
dollars at the expense of Asian currencies, particularly during
the type of financial market volatility experienced in recent
months.
Anticipation of aggressive rate hikes by the Fed and
confirmation by Philippine Central Bank Governor Rafael
Buenaventura of market talk that Keppel TatLee is considering
acquiring Urban Bank pushed the Singapore dollar down sharply
toward the end of the local trading session.
The purchase would be the latest in a series of foreign
acquisitions by local companies including Singapore Airlines Ltd.
and Singapore Telecommunications Ltd. Generally, such
transactions would require the buyer to sell Singapore dollars in
the spot foreign exchange market.
Buenaventura, in a television interview with CNBC Asia, said
Keppel TatLee is among a few groups interested in acquiring the
Philippine bank, but declined to elaborate.
The sale of Urban Bank, which was closed last week by
Philippine authorities after several days of heavy withdrawals by
depositors, would likely be through an auction within the next 30
days, Buenaventura said.
The U.S. dollar was quoted at S$1.7165, up from S$1.7090 a day
earlier.
Prospective capital inflows from the sale of Urban Bank and
fears the central bank might intervene again - traders say it
bought pesos last week at around 41.400 pesos to the dollar -
lifted the Philippine currency.
In thin trade, the dollar ended at 41.279 pesos from 41.295
pesos Friday.
The baht plunged to a five-month low very late in the day on
heavy offshore buying of dollars by hedge funds in a fairly thin
market.
An absence of baht buy orders from exporters exacerbated the
move, which was the largest one-day percentage change since mid-
February.
The U.S. currency was at 38.380 baht, up from 38.060 baht late
Monday.
Elsewhere, the New Taiwan dollar weakened sharply as the
Weighted Price Index of the Taiwan Stock Exchange closed down 1.6
percent on the day.
Relations with China remain tense, as Chinese leaders await
Taiwan's President-elect Chen Shui-bian's inaugural speech May 20
for an indication of his stance on the "one China" principle.
The U.S. currency ended trade in Taipei at NT$30.675, up from
NT$30.637 Saturday. But the downside for the local currency could
be limited as traders expect Taiwan's central bank will intervene
to support it near NT$30.700.
The dollar also ended at 1,110.1 won, up from 1,109.60 won
Friday, helped by dollar-buying by the state-run Korea
Development Bank.