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.