Asian currencies rise as buying lifts won to four-month high
Asian currencies rise as buying lifts won to four-month high
HONG KONG (Dow Jones): Sustained buying lifted the South
Korean won to a fresh four-month high during intraday trading
Friday, once again triggering central bank intervention to temper
the currency's rise.
Regional currencies elsewhere in Asia also strengthened as
market players covered their short positions ahead of the
weekend.
The rupiah, however, remained under pressure as investors
bailed out of Indonesia, afraid calls for independence by the
North Sumatran province of Aceh could lead to a new political
crisis.
Sentiment toward the South Korean won remains buoyant
following Thursday's upgrading of the country's sovereign credit
ratings by Standard & Poor's Corp.
Traders reported robust fund inflows from foreign investors
together with heavy won-buying from South Korean exporters keen
to convert foreign currency revenues before the won can
appreciate further.
Won-buying pushed the U.S. dollar to an intraday low of
1,166.80 won, before the central bank entered the market for the
second day running to support the U.S. currency.
Concern that the pace of the won's rise may damage the
competitiveness of South Korean exporters prompted the Finance
Ministry to threaten new measures to limit the currency's
appreciation.
Although most market players are upbeat on South Korea's
economic prospects, traders warned that official measures to hold
down the won are likely to prove successful.
"Foreign portfolio managers are overweighting the Korean
market, but they are not buying the won that aggressively," said
Steven Chang, Hong Kong-based foreign exchange manager at State
Street Bank, a major global custodian that closely monitors
portfolio flows.
"The won is definitely undervalued at current levels, but
Korea is a relatively closed market and it will not be a big
problem for the authorities to prevent appreciation," he added.
By the end of the Seoul session, the dollar had picked up from
its earlier low to close at 1,170.50 won, but remained below
Thursday's closing level of 1,173.10 won.
Fears that Aceh's demands for independence from Jakarta could
evolve into a full-blown crisis for Indonesia's new government
prompted further selling of the rupiah Friday.
As market players scrambled to cover their exposure to the
currency, the rupiah dropped to its lowest level since
Indonesia's presidential election three weeks ago, some 7.5
percent below its post-election peak last week.
The rupiah found some support, however, as the U.S. dollar's
rally topped out at Rp 7,200 when market players emerged to buy
the rupiah, believing the currency represents good economic value
at that level.
"A lot of the dollar shorts have been cleared out now. Rp
7,200 is looking very toppish," said the rupiah trader at one big
U.S. bank in Singapore.
In a country alert issued late Thursday, Bank of America
strategist Simon Flint said the market was exaggerating the
dangers of Aceh's secession and that the currency was
overshooting. The dollar's rise will top out between Rp 7,200 and
Rp 7,300, he predicted, before retracing to levels around Rp
6,700.
Toward the end of interbank trading Friday, the U.S. dollar
had slipped from its earlier high to trade at Rp 7,115, a touch
lower than Rp 7,144 late Thursday.
Elsewhere in Southeast Asia, the Singapore dollar, Thai baht
and Philippine peso all strengthened with dealers reporting that
market players who had sold down the regional currencies earlier
in the week were cutting back the size of their positions.
With Singapore expected to release data Thursday showing
strong economic growth in the third quarter, traders holding
short positions in the local currency are becoming increasingly
uncomfortable, said a dealer at one Singapore bank.
By the end of interbank dealing, the U.S. dollar had slumped
to S$1.6682, down from S$1.6761 the previous day.
Against the Thai baht, the U.S. currency eased to 38.8050 baht
from 39.0300 baht the day before.
In trading against the Philippine peso, the dollar ended at an
intraday low of 40.180 pesos, down from 40.323 pesos at
Thursday's close.
Against the New Taiwan dollar the U.S. currency closed down at
NT$31.745 from NT$31.754 the previous day.