Asian currencies test long term highs as liquidity dries
Asian currencies test long term highs as liquidity dries
HONG KONG (Dow Jones): Strong economic data, robust stock market performances and the Japanese yen's run-up against the U.S. dollar helped lift Asian regional currencies during local trading hours Monday.
Positive sentiment propelled the Singapore dollar to its highest level since January, while the Thai baht climbed to a two-month high. The Indonesian rupiah also rose.
Hopes that the Korean government will successfully avert a systemic crisis triggered by the collapse of the Daewoo group lifted the won to a six-week high. The New Taiwan dollar continued to inch higher, pushing doggedly upwards toward levels unseen in more than two years.
Despite the strong performance of Asian currencies in recent weeks, activity levels in regional foreign exchange markets are suffering as liquidity dries in the approach to the end of the year.
Dealers in Singapore complained that interest in trading in Southeast Asian markets was subdued, even though both the Singapore dollar and the baht hit medium-term highs.
Traders said sales of the U.S. dollar executed by local banks were behind the U.S. currency's fall through the S$1.6600 level in morning dealing.
However, major technical support at S$1.6580 held firm, and the U.S. currency rallied above S$1.6600 again in late trading as market dealers, nervous of provoking U.S. dollar-supportive intervention by the local monetary authority, covered their positions.
"It wasn't the central bank buying (U.S. dollars), it was just normal market trading," said one dealer at a U.S. bank in Singapore, in response to rumors that the Monetary Authority had been in the market buying the U.S. currency at the day's low.
Late in Asian trading the U.S. dollar was quoted at S$1.6611, down from S$1.6664 toward the end of interbank dealing Friday.
Liquidity in the baht spot market was also thin. Dealers reported moderate sales of the U.S. dollar by bank traders attempting to trigger stop-loss sales orders for the U.S. currency believed to be positioned around 38.50 baht.
Their offers were insufficient to overcome dollar-buying interest from Thai corporate customers, whose bids supported the U.S. currency at its intraday low at 38.5500 baht.
Late in Asian dealing the dollar was still being offered at 38.5500 baht, down from 38.7150 baht late Friday.
Market optimism that multilateral lenders will soon resume payments to Indonesia following the visit to the country this week of a team of senior International Monetary Fund officials boosted the rupiah.
Early trading saw the U.S. dollar sold down as low as 6,730 rupiah. The selling pressure failed to force the dollar below the four-month low of Rp 6,700 set following last months elections, however, and the U.S. currency recovered slightly during afternoon dealing.
Toward the end of local interbank trading, the dollar was quoted at Rp 6,762, down from Rp 6,902 late Friday.
With markets in Manila closed for the All Saints Day holiday, there was no trading Monday in the Philippine peso.
As fears of a liquidity crisis receded, and a series of economic data releases confirmed the strength of Korea's rebound, won purchases pushed the dollar to a six-week low at 1,194.50 won.
At that level, however, the state-controlled Korea Export- Import Bank and Korea Development Bank stepped into the market, buying dollars to check any further won appreciation.
By the end of trading the bank's action had lifted the dollar to 1,195.50 won, above its earlier low, but still down steeply from 1,200.00 won at the close of Friday's session.
The New Taiwan dollar continued its slow march higher Monday. Intraday trading saw the U.S. dollar sold as low as NT$31.726, its lowest level since early December 1997. At the close of domestic session, the U.S. currency was at NT$31.731, down from NT$31.736 Saturday.