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.