Asian currencies stronger in late trading

Asian currencies stronger in late trading

SINGAPORE (Dow Jones): Asian currencies were sharply stronger
in late trading Friday, as U.S. dollar and yen-denominated
investment flows seeped back into the region.

The start of the fourth business quarter - the second half of
Japan's fiscal year - marked a sea change in capital flows,
traders said, as hedged positions for yen-denominated debt
payments were unwound and Japanese corporate, armed with a
stronger yen, renewed direct investment across the region.

"There is no reason to hedge the yen positions now that debt
payments have been satisfied, so people are cashing out of their
long (U.S.) dollar and yen positions," said Jimmy Koh, regional
economist at IDEA Global.com in Singapore.

Traders said the regional currency markets have also digested
news of the now-contained nuclear accident in Japan, and are
focusing on whether the Bank of Japan is prepared to increase
market liquidity as the yen once again starts drifting toward
Y100 to the U.S. dollar.

Japanese officials said during last weekend's meeting of
finance ministers from the Group of Seven leading industrial
nations that they were prepared to do just that if yen strength
continued to be a factor.

At 0800 GMT, the U.S. dollar was trading at 105.87 yen, above
105.61 yen late Thursday in Asia, but well below 106.32 yen at
0000 GMT Friday - the level reached as a result of knee-jerk yen-
selling when news of the nuclear accident reached the markets
late Thursday.

Investors are now awaiting the release Monday of the quarterly
Tankan survey of business sentiment in Japan and Tuesday's U.S.
Federal Open Market Committee meeting, traders said.

A peaceful start to the meeting of Indonesia's highest
legislative body Friday also prompted the liquidation of long
U.S. dollar positions by offshore banks, pushing the U.S. dollar
down more than 4 percent against the rupiah.

At 0800 GMT, the U.S. dollar was trading at Rp 7,985, well
down from Rp 8,360 in late trading Thursday. The assembly now
begins the task of choosing the next president and setting the
nation on the unfamiliar path to democracy.

The release of strong economic data underpinned buoyant market
sentiment. Falling food prices pushed the country's consumer
price index down by 0.68 percent in September, leading to a year-
on-year inflation rate of just 1.25 percent - the lowest level in
15 years.

But, "The market is still thin, still cautious; any shock to
the system - financial, political, social - will quickly push the
U.S. dollar higher," warned a currency strategist at a European
bank in Singapore.

The U.S. dollar is also trading at 40.7050 Thai baht, down
from 41.075 baht late Thursday in Asia. Traders said there is no
reason for the U.S. dollar to remain strong against the baht now
that yen-denominated debts have been satisfied, allowing hedged
positions to be unwound.

Thailand's deputy prime minister, Supachai Panitchpakdi, said
Friday that strong economic fundamentals should also continue to
buoy the baht. He said the country's low inflation, consistent
trade surpluses, substantial foreign exchange reserves and a rise
in investment will support the currency.

Maya Pinto, regional economist at IDEA Global.com, expects the
U.S. dollar to continue to languish against the baht.

On the Philippine dealing system, the U.S. dollar was trading
at 40.7050 pesos, down from 40 pesos late Thursday.

In North Asia, the U.S. dollar is trading at 1,216 won, almost
unchanged from 1,215.9 won late the previous day.

The U.S. dollar was also trading at NT$31.779, almost flat
from NT31.778 late Thursday.

Desmond Supple, regional economist at Barclays Bank in
Singapore, said the New Taiwan dollar has showed resistance to
the financial aftershock of the recent earthquake.