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.