Asian currencies soar as funds flow

Asian currencies soar as funds flow

HONG KONG (Dow Jones): The Korean won and the New Taiwan
dollar each surged to their highest levels in over two years
Tuesday, in a banner day of trading for Asian currencies.

In other regional markets the Singapore dollar climbed to its
strongest in a year, while the Thai baht hit a five-month high
and the Philippine peso reached its highest in nearly four
months.

Only the Indonesian rupiah was left floundering, closing just
slightly higher on the day, while other regional currencies
enjoyed a powerful New Year rally driven largely by inflowing
investor funds.

"There is a feeling of euphoria out there," said Patrick
Bennett, foreign exchange strategist at Warburg Dillon Read in
Singapore.

Investors who had held off buying Asian currencies afraid of
widespread computer problems at the New Year were now rushing to
allocate assets to regional markets following a largely trouble-
free millennial calendar change, Bennett explained.

"There is a fear that they will miss the boat if they don't
get in now," he said.

Illiquidity exaggerated the extent of the runup, especially in
markets in Seoul, Taipei and Bangkok, for which Tuesday was the
first day of trading this year. With many banks still to resume
making markets in regional currencies, it took only moderate
buying interest to fuel the sharp rally.

The rapid speed of the gains seen Tuesday led many market
participants to caution that the pace of the current appreciation
will prove unsustainable over the longer run.

"Today's move is overdone," said Chia Hsin-Li, Asian currency
strategist at J.P. Morgan in Singapore. "It's the first real day
of trading, and everyone is just getting a little bit too
excited.

That excitement clearly showed through in trading in North
Asian markets, where currency investors brushed aside threats of
intervention from the Korean finance ministry to buy the won up
to its highest level since November 1997.

Aggressive dollar-buying by state-run Korea Development Bank
proved insufficient to stem the tide, as won purchases pushed the
dollar down to finish the session at 1,122.50 won, only just
above its intraday low at 1,122 won and 1.4 percent below the
1999 close of 1,138 won recorded last Thursday.

Heavy official intervention also failed to block a rapid
appreciation of the New Taiwan dollar, as investors pumped funds
into Taipei's soaring equity market. Dealers in Taiwan estimated
that the central bank had bought as much as $400 million in an
attempt to support the U.S. currency on a day when dealing
volumes surpassed $1 billion.

By the close of domestic trading in Taipei, central bank
buying had lifted the U.S. currency off its earlier intraday low
of NT$30.501 to close at NT$30.602. Even at that level, however,
the U.S. currency was 2.5% below last Thursday's close of
NT$31.395 and at its lowest closing level since early November
1997.

Investor optimism was also credited with driving Southeast
Asian currencies sharply higher Tuesday.

U.S. investment banks were among the major buyers of the
Singapore dollar, according to dealers in the island republic, as
the local currency was pushed up around 0.7 percent to reach its
strongest level in over a year.

Traders warned, however, that the Monetary Authority of
Singapore was unlikely to stand aside and permit such a rapid
appreciation of the currency, and toward the end of Asian dealing
hours the Singapore dollar surrendered some of its gains, with
the U.S. currency lifting off its earlier low of S$1.6483 to
trade at S$1.6505. Late Monday the U.S. dollar had been quoted at
S$1.6600.

Elsewhere the Thai baht climbed to its highest level since
August while the Philippine peso reached its strongest level
since September on reasonably heavy volumes of $331 million.

Late in Asia the dollar was quoted against the baht at 36.8450
baht, little changed from levels seen offshore late Monday, but
down steeply from 37.4500 baht late Thursday, the last day of
trading in Bangkok in 1999.

On the Philippine Dealing System, the U.S. currency closed
against the peso at 39.770 pesos, down from 39.980 pesos the day
before.

Only the rupiah failed to participate in the general rally as
speculation over a possible cabinet reshuffle, reports of further
regional violence damped sentiment toward the currency, despite a
strong rally in local stocks.

Late in Asia, the dollar was quoted against the rupiah at Rp
7,045, down from Rp 7,070 late Monday.