Asian currencies mostly up late, caution ahead of Fed rate policy
Asian currencies mostly up late, caution ahead of Fed rate policy
SINGAPORE (Dow Jones): Most Asian currencies were higher late
Tuesday, as caution prevailed ahead of an anticipated interest
rate cut by the U.S. Federal Reserve and the release of key U.S.
economic data this week, dealers said.
The New Taiwan dollar, the South Korean won, the Singapore
dollar and the Indonesian rupiah were stronger, while the Thai
baht and the Philippine peso were weaker.
The Indonesian rupiah closed slightly higher on Tuesday in
thin trade as participants remain cautious ahead of expected
antigovernment demonstrations later this week.
The dollar closed at Rp 9,435, down from Rp 9,450 at Monday's
close.
"Until there's some unexpected development, riots or
something, I think Rp 9,420 to Rp 9,470 is the range," said one
foreign bank trader.
Threats to Wahid's 15-month presidency continue to keep
pressure on the rupiah.
But new foreign exchange laws which make it difficult for
offshore investors to get hold of rupiah meant few foreign banks
are taking positions.
Most are concerned the new laws - which ban the lending of
rupiah offshore - will make it very difficult to fund speculative
long-dollar positions.
While most of these currencies had found solace from the yen's
gains in early trading, the market was left directionless late in
the day as the Japanese currency languished in a narrow range
ahead of the Federal Open Market Committee's two-day meeting on
interest rate policy which starts Tuesday, dealers said. The Fed
will also unveil data on fourth quarter economic growth.
Dealers said Asian currencies have largely priced in a half
percentage point cut in U.S. interest rates this week.
"If the Fed doesn't deliver the 50 basis-point cut, the market
will be disappointed," said Thio Chin Loo, a regional currency
strategist at BNP Paribas Group.
A half percentage point cut in U.S. interest rates could offer
short-term relief for Asian markets, especially for the
currencies of Taiwan and South Korea. Their export-oriented
economies are highly vulnerable to the U.S. economic slowdown.
The New Taiwan dollar Tuesday finished at its highest level
since Nov. 18, at NT$32.435 against the U.S. currency, compared
with Monday's close of NT$32.525, in heavy dealings valued at
US$967.5 million.
The South Korean won found support from dollar-selling by
exporters, dealers said. The dollar finished at 1,265 won, down
from Monday's close of 1,267.1 won.
Some analysts said the recent gains in the two North Asian
currencies will likely be transient.
"We may be at the bottom of the down cycle, but I don't think
the rally will be sustainable yet," said Chi Lo, regional head of
research at Standard Chartered Bank in Hong Kong.
In Taiwan, political uncertainties still loom - including a
prolonged dispute between the government and opposition
legislators over whether to resume the construction of the
island's fourth nuclear plant.
"For Korea, there are signs that the government is doing more
on reforms, but there are also conflicting signals that they are
trying to bail out the bad companies," said Lo.
Lo added that it is still "six months away" before a sustained
turnaround in these two North Asian currencies would take place.
The "worsening debt dynamics" in South Korea and Taiwan - with
nominal gross domestic product growth falling below nominal
interest rates - will also weigh on their currencies, Lo said.
Against the Singapore dollar, the U.S. currency was at
S$1.7471, down from S$1.7486 late Monday.
In the Thai currency market, the dollar was at 42.655 baht, up
slightly from 42.635 baht late Monday.
On the Philippine Dealing System, the dollar closed at 49.600
pesos, up from 49.480 pesos Monday.