Asian currencies up on equity inflows

Asian currencies up on equity inflows

Dow Jones, Singapore

Asian currencies were mostly stronger in range-bound trading Friday, supported by equity-related inflows which pushed the New Taiwan dollar to a near 10-month closing high.

But it was a generally listless session as market players refrained from taking new positions, just squaring positions ahead of the weekend and the July 4 Independence Day holiday in the U.S.

The market remained wary about intervention, which analysts said will keep a lid on the currency appreciation resulting from portfolio inflows into the region.

A "bullish FX view is muddied by FX intervention," as an uncertain export recovery makes stronger currencies unwelcome, said Vincent Low, head of foreign exchange and bond strategy for Asia at Merrill Lynch.

The U.S. unit closed at 34.390 against its Taiwan counterpart, down from NT$34.465 Thursday, in dealings worth $925 million, the highest so far this year. This was the dollar's lowest close since Sept. 10, 2002.

"There's hot money coming in," said a Taipei-based dealer at a local bank.

There wasn't much bids for the U.S. dollar due to the holiday in the U.S., while exporters were actively selling the currency, said a foreign bank dealer in Taipei.

He estimated the Taiwan central bank bought around $500 million to $600 million to slow the local dollar's rise. But dealers said the central bank wasn't aggressively trying to reverse the local dollar's trend.

Taiwan's key stock index rose 1.1 percent to end at 56.54 points, marking a fresh closing high for the year so far.

Equity-related dollar inflows also helped the South Korean won end higher for the fifth straight session, with the dollar closing at 1,180.2 won, down from 1,183.5 won Thursday.

Some exporters also sold dollars at the 1,183 won level, traders said.

Foreign investors were net buyers of 16.2 billion won worth of shares Friday. In the previous session, they bought 519.2 billion won in local shares, the biggest amount of net buying in a single session since April 19, 2001.

Equity inflows and government intervention will continue to be key factors to watch going forward.

"All focus is on equity inflows Monday and how authorities will cope with that situation," said a Seoul-based trader.

If intervention is unsuccessful, the dollar is likely to fall below the key 1,180 won level and could even head for the lower 1,170s won, observers said.

The Singapore dollar was modestly higher in thin trading ahead of the July 10 release of the central bank's semiannual policy review statement and the government's advance estimates of second-quarter economic performance.

The U.S. unit was quoted at $1.7508 late in the local session, down from S$1.7516 Thursday.

Gross domestic product is widely expected to contract in the April-June period, though most analysts now expect a rebound in the subsequent quarters.

There was a spot of good news earlier Friday, as a better set of data from the Purchasing Managers' Index suggested the key manufacturing sector may have bottomed out. The PMI broke above the threshold 50 percent mark to 50.8 percent in June, marking an expansion in manufacturing for the first time in four months.

BNP Paribas said the PMI data reinforce its view that the Monetary Authority of Singapore will stand pat on policy.

Elsewhere, the Philippine market shrugged off data that suggested the economy might be running out of some steam, traders said.

The dollar ended at 53.40 pesos on the Philippine Dealing System, little changed from 53.39 pesos in the previous session, amid thin corporate demand for the U.S. unit.

The National Statistics Office Friday said inflation rose 3.4 percent on year in June, well above the 2.8 percent rise the market had expected.

Also Friday, the statistics office said exports contracted 4 percent on year in May, its second straight month of decline after a long spell of growth.

The Indonesian rupiah edged up on the back of capital inflows linked to Bank Mandiri's initial public offering of shares, which closes Friday, dealers said.

The dollar ended the local session at 8,185 rupiah, down from Rp 8,222 Thursday.

Dealers said some foreign banks in Jakarta sold the dollar late in the session, likely on behalf of foreign investors who are buying Bank Mandiri shares.

The offer, which will raise around $330 million in cash for the government, has drawn strong demand from foreign investors.

As against the Thai baht, the dollar was quoted around 41.69 baht late in Asia, down from 41.765 baht Thursday.

A trader at a European bank in Singapore said there was some offshore selling in the dollar/baht pair, but this was partly offset by onshore buying.