Asian currencies regain ground late
Asian currencies regain ground late
HONG KONG (Dow Jones): Asian currencies recovered some of the ground lost earlier in the week during local trading hours Friday, as regional markets reassessed the situation in East Timor in a calmer light.
But although the Indonesian rupiah, the Thai baht and the Philippine peso all made gains during the day, dealers and analysts warned that regional currencies will remain vulnerable to sudden reversals of fortune over the coming week.
Elsewhere, the New Taiwan dollar strengthened moderately, while the South Korean won and the Singapore dollar eased lower, as dealers in all three markets continued to eye swings in the yen's exchange rate versus dollar.
A calmer assessment of developments in East Timor helped the rupiah continue the advance initiated Thursday afternoon, when dollar sales executed by state-owned Bank Mandiri forced the U.S. currency down from its 6-month high at Rp 9,000.
While much of the rupiah's rally could be attributed to pre- weekend liquidation of long dollar positions established earlier in the week, some speculative players in the offshore market were seen jumping on the new trend and actively selling the U.S. dollar short against the Indonesian currency.
By late in Asian trading, the U.S. dollar had settled at Rp 8,080, down steeply from Rp 8,655 late the previous day.
Despite the rupiah's rally, few observers were prepared to offer much comfort to holders of the beleaguered currency.
"I don't think you can say the panic is over when it comes to the rupiah," said Chia Woon Khien, treasury economist at Skandinaviska Enskilda Banken in Singapore.
Other market participants agreed, warning that a fresh flare- up in violence in East Timor, or further intransigence from the Jakarta government, could easily see the dollar bid back up to the Rp 9,000 level.
Market participants also remained wary of predicting sustained recoveries in the Thai baht and Philippine peso.
The Thai baht, said Chia at Enskilda, had been a "willing victim" of the regional sell-off earlier in the week.
A number of offshore fund managers believe the baht's current exchange rate overvalues the currency, given Thailand's relatively slow progress towards economic recovery, and the financial problems still afflicting the country's banking sector.
Although the Thai currency strengthened Friday after falling to an 11-month Thursday, according to Daniel Lian, Asian strategist at Barclays Capital, the currency is likely to weaken once again over the coming weeks as market players establish new short positions.
Toward the end of Asian interbank trading Friday, the U.S. dollar was quoted against the baht at 39.4450 baht, down from 39.5350 baht late Thursday.
The Philippine peso also ended Friday's trade higher, with the U.S. dollar closing in Manila at an exchange rate of 39.943 pesos, down from 40.240 pesos at the previous close.
But with short term interest rates still below 9 pesos, the Philippine peso is likely to remain under pressure, analysts argued.
The Singapore dollar ended little changed, with the U.S. dollar quoted at S$1.6884, compared with S$1.6880 the day before.
Tugged one way by the strength of the Japanese yen, with which it is highly correlated, and in the opposite direction by the weakness of Southeast Asia's other regional currencies, the Singapore dollar is likely to continue to register little movement in the immediate future, said dealers.
Continued inflows of portfolio funds lifted the New Taiwan dollar another notch.
At the local close, the U.S. currency was quoted at NT$31.800, down from NT$31.819 the day before.
The South Korean won ended lower after slipping in line with the Japanese yen following the Bank of Japan's dollar-supportive intervention early Friday.
At the Seoul close, the dollar was at 1,192.20 won, up from 1,190.50 won the previous day.