Asian currencies mostly up late; earlier Japanese yen blow mild

Asian currencies mostly up late; earlier Japanese yen blow mild

Netty Ismail, Dow Jones, Singapore

Most Asian currencies were higher late Thursday, after mostly failing to trail the yen's earlier descent to yet another 39- month low.

The yen's decline to a new 39-month low of 134.78 yen to the dollar earlier in the Asian session dealt only a mild blow to the rest of the region's currencies.

"You'd expect some of the movements to be echoed but they're rather muted at the moment," said James Malcolm, a regional currency strategist at JPMorgan Chase Bank.

Foreign equity inflows into many of the region's stock markets - particularly in South Korea, Taiwan, the Philippines and Thailand - helped mitigate the pain from the yen's earlier weakness, observers said.

The relative steadfastness of the region's currencies is also attributed to expectations that the rest of Asia's economies are better positioned than Japan to climb out of the global economic quagmire.

"Japan is in a crisis but not the rest of Asia," said a dealer at a European bank.

The downward pressure on Asian currencies subsided late Thursday as the yen subsequently regained its footing. At 0926 GMT (0426 Jakarta time), the dollar was quoted at 134.31 yen, little changed from 134.35 yen late Wednesday in New York.

Malcolm at JPMorgan noted that there has been a divergence between North Asian currencies and their counterparts in the south.

The South Korean won and the New Taiwan dollar have been more sensitive to the yen's persistent weakness. In contrast, currencies of the Philippines, Thailand and Singapore have been "rather less inclined to move with dollar/yen," given that less emphasis is placed on the yen crosses in those markets, Malcolm said.

Although many in the market believe the Singapore dollar is vulnerable to a further weakness in the yen, the Japanese currency's weighting in JPMorgan Chase's estimate of the trade- weighted basket of currencies for the Singapore dollar is only about 10 percent - similar to the euro's weighting in the basket, the strategist added.

The central bank, also known as the Monetary Authority of Singapore, guides the local dollar within a trading band against a basket of currencies of the country's major trading partners and key competitors.

After earlier slipping past S$1.8400 against the U.S. currency, the Singapore dollar was quoted at S$1.8381 late Thursday, steady compared with S$1.8382 late Wednesday.

Despite the yen's slide to new 39-month lows, the U.S. dollar continued to face strong resistance around S$1.8420.

"The market feels they're long of U.S. dollars," said Mansoor Mohi-uddin, a regional currency strategist at UBS Warburg.

"Every time the U.S. dollar rallies against the Singapore currency on the back of dollar/yen, players get out of their long U.S. dollar positions."

After initially feeling the strain from the wobbly yen, the won found solace from foreign equity fund inflows, which propelled Seoul's benchmark stock index by 2 percent to its highest close in 18 months.

The dollar ended at 1,330.5 won, down marginally from Wednesday's close of 1,331.2 won.

The dollar failed to progress beyond its intraday peak of 1,334.8 won as foreign investors bought a net 173.9 billion won of South Korean shares and as exporters offered the U.S. currency when it traded between 1,334 to 1,335 won.

Against the New Taiwan dollar, the U.S. dollar closed at NT$35.076, lower than NT$35.082 Wednesday, as Taiwan's central bank appeared to allow the local currency to mirror the yen's fluctuations, dealers said.

As Manila's benchmark stock index jumped by 1.7 percent, the Philippine peso closed slightly stronger at 51.32 peso to the dollar, from 51.36 peso Wednesday.

The yen's earlier weakness had pushed the peso to as low as 51.430 peso.

The Thai currency was stronger at 44.150 baht to the dollar, compared with 44.250 baht, as the local stock market surged by 2.2 percent.

Dollar demand by companies needing to fund their imports and repay maturing debts weighed on the Indonesian rupiah, which bucked the overall trend in the region, dealers said. The dollar was quoted around 10,460, higher than 10,400 rupiah late Wednesday.

Foreign exchange participants are focusing on U.S. Federal Reserve Chairman Alan Greenspan's testimony to the Senate banking committee at 1500 GMT Thursday.

"The market is pricing in a smaller chance of a rate cut next week following strong U.S. data as well as an anticipated positive speech from Greenspan tonight," BNP Paribas said in a report.

BNP Paribas, meanwhile, maintains its view that the Fed will likely cut interest rates by 25 basis points at the end of its two-day policy setting meeting Wednesday, given the absence of inflationary pressures and lingering weakness in some sectors of the U.S. economy.