Asian currencies mostly up, Singapore dollar leads rise
Asian currencies mostly up, Singapore dollar leads rise
SINGAPORE (Dow Jones): The dollar lost its luster against most Asian currencies on Thursday as the debate over the strong dollar policy raged on, and the prospects for a U.S. economic rebound in the second half grew increasingly nebulous, market watchers said.
U.S. manufacturing activity fell more than expected in July, as did construction spending in June.
A bullish research report on the outlook for computer-chips from once-bearish Merrill Lynch also helped boost Asian currency markets.
Comments by Merrill Lynch that the worst may be over for global semiconductor companies propelled the stock markets upward in Japan, South Korea and Taiwan, which in turn pushed up their respective currencies, dealers said.
But The Indonesian rupiah lost ground on disappointment that President Megawati Soekarnoputri will delay the announcement of her new cabinet to next week, from Friday, dealers said.
Megawati's silence over the cabinet since coming to power July 23 have kept the market on edge.
The dollar was at Rp 9,640, slightly higher than Rp 9,625 late Wednesday.
The market was worried that Megawati's hands are tied in naming credible cabinet members and will instead give most of the cabinet posts to political parties.
It was the Singapore dollar which stole the limelight, as it surged to its strongest level against the U.S. dollar since end- March.
Inspired by the strength of the euro, the won and the New Taiwan dollar, the Singapore dollar pierced through the psychologically important S$1.8000 resistance level to the U.S. currency, dealers said.
With the market caught off guard by the U.S. dollar's break below S$1.8000 - a level many had expected to hold - it triggered a wave of stop-loss selling in the U.S. currency, especially by offshore funds, dealers said.
Market participants were forced to bail out of their positions since they were still heavily long in U.S. dollars, despite the recent downward correction in the currency.
"It was a vicious move down," said Mansoor Mohi-uddin, a regional currency strategist at UBS Warburg.
The U.S. dollar had skidded to as low as S$1.7870, before bouncing back to S$1.7897 at 0850 GMT (3:50 p.m. Jakarta time). Late Wednesday, the U.S. dollar was at S$1.8038.
Mohi-uddin said the U.S. dollar's ability to recover above the S$1.7875 technical support level indicates that the currency should have bottomed out for now.
"It appears that there are no more stop-losses below this level," he added.
Strong foreign equity fund inflows into respective markets propelled the South Korean won and the New Taiwan dollar higher Thursday, dealers said.
The dollar finished at 1,288.2 won, down from Wednesday's close of 1,296.5 won.
Foreign investors bought a net 153.3 billion won in shares which contributed to a 0.8 percent rise on the Seoul bourse.
The New Taiwan dollar closed at a three-week high of NT$34.699 against its U.S. counterpart, compared with NT$34.730 Wednesday.
Foreign institutional investors bought a net NT$5.24 billion worth of shares on the Taipei bourse Thursday, hoisting the benchmark index up by 3.1 percent.
With sales of the U.S. currency by exporters adding to the New Taiwan dollar's strength, Taiwan's central bank bought at least US$300 million toward the close to curb the local currency's appreciation, dealers said.
With most regional central banks having actively defended their currencies against the onslaught in recent months, any pullback in the U.S. dollar should provide them with the opportunity "to replenish their reserves," said Philip Wee, a market strategist at Singapore's DBS Bank. This should cushion the U.S. currency's slide, he added.
The dollar closed at 53.645 pesos on the Philippine Dealing System, down from 53.770 pesos Wednesday.
The Thai baht rode on the coattails of the Singapore dollar's gains, dealers said.
The dollar was at 45.635 baht, lower than 45.720 baht late Tuesday.