Asian currencies shed gains as baht wilts
Asian currencies shed gains as baht wilts
SINGAPORE (Reuters): Asian currencies surrendered some of their gains to demand for cheap dollars late yesterday as the Thai baht -- a star performer in recent sessions -- fell back through a key support.
Declines in regional stock markets also depressed Asian currencies, along with the U.S. dollar's late spike up after Russian President Boris Yeltsin said U.S. President Bill Clinton's moves on Iraq could lead to world war.
But dealers did not expect regional currencies to crash to new lows in the near future.
"I think we're entering into a phase of consolidation from here," a U.S. bank dealer in Singapore said.
He said recent sharp gains in the baht, Malaysian ringgit, Singapore dollar and Indonesian rupiah had been driven by aggressive dollar sales by a U.S. investment house in Hong Kong.
"Part of the reason seemed to be that they had a lot of funds going into these stock markets," he said.
The baht slid back through the 50.00 per dollar level after earlier climbing towards 46.00 as exporters unloaded dollars in the face of the baht's sustained rebound after Bangkok scrapped a two-tier currency trading system last week.
"There are all sorts of rumors from the King being ill to talk that the Bank of Thailand is buying dollars. But I don't think they should come into the open market," said one dealer.
Dealers said the baht reversed course as Thai companies sought dollars for loan payments, investors booked profits and some players started re-establishing long dollar positions.
"For me it should never have been 46 and even at 48 it was overdone," said one foreign bank dealer in Bangkok.
The baht's drop triggered falls in other Southeast Asian currencies, pushing the Malaysian ringgit back below the 4.00 per dollar level in thin late trade.
The Singapore dollar was also down but managed to hold above the 1.70 level against the U.S. dollar.
The Indonesian rupiah fell off its highs of 8,700 to the dollar, shedding strength drawn earlier from dollar sales by the central bank and U.S. funds.
The Philippine peso managed to close higher after trading a range as corporate dollar demand was balanced by foreign fund flows to the stock market.
In north Asia, the Taiwan dollar finished above the T$33 level to the U.S. dollars, thanks to the yen's rise and expected foreign fund inflows to the recently bullish stock market.
Foreign funds showed huge net buying of T$5.6 billion on Tuesday and T$5 billion on Monday in the stock market.
The South Korean won ended slightly easier after hovering between dollar demand from importers and dollar sales by portfolio funds for stock market investments.