Asian monies boosted by Zhu's statement

Asian monies boosted by Zhu's statement

SINGAPORE (Dow Jones): Southeast Asian currencies snapped back from Monday's lows in Asian trading on Tuesday, regaining most of the previous day's losses after Chinese Premier Zhu Rongji quashed market fears China was about to devalue its currency.

Having sold down the regional currencies on Monday in response to a Chinese newspaper article which appeared to favor devaluation, traders rushed to buy them back early on Tuesday after Zhu reiterated his government's commitment to a stable yuan policy.

In Southeast Asia the Singapore dollar and the Indonesian rupiah both ended local trading hours well up from the near four- month lows they hit on Monday. The Thai baht and the Philippine peso benefited too, also ending the day considerably stronger.

In North Asia both the South Korean won and the New Taiwan dollar recovered from levels seen on Monday, although the sluggish nature of the won's rise led some market participants to suspect the Bank of Korea was buying U.S. dollars to hold down the local currency.

Among Southeast Asian currencies, the baht, the Philippine peso and the rupiah all picked up strongly.

Against the baht, the U.S. dollar sank back to 36.6800 baht, from 36.9250 late in Asia on Monday.

On the Philippine Dealing System, the U.S. currency slipped against the peso, ending at 38.47 pesos, compared with 38.78 at Monday's close.

Against the rupiah the U.S. dollar eased to end Asian interbank dealing at Rp 9,100, down from Rp 9,300 a day earlier.

Late in Asian trading on Tuesday, the U.S. currency was quoted at S$1.6830, down from S$1.6880 late the previous day.

And selling the Singapore dollar short against other regional currencies could be risky too, Wee argued.

Although many traders believe that the Korean won should strengthen while the Singapore dollar weakens, the won has proved disappointingly heavy in the foreign exchange market recently.

Although the Korean currency did rise on Tuesday, traders said its reaction to Standard & Poor's upgrade of South Korea's sovereign ratings on Monday was surprisingly muted.

After falling to a low of 1,171.5 won at the open, the U.S. dollar later regained most of its early losses to finish domestic trading at 1,176 won, down only slightly from Monday's closing level of 1,180.

Also in North Asia, the New Taiwan dollar finished the day higher, after hitting a six-week low in intraday trading on Monday. At the close of local trading in Taipei on Tuesday, the U.S, dollar was quoted at NT$32.295, down from NT$32.349 the day before.

Although the fears that a devaluation of the yuan may trigger a fresh round of depreciation among the regional currencies have abated for the time being, at least one analyst warned that the market should not breathe too easily.

The rumors of a Chinese devaluation were originally sparked by Brazil's real crisis, and that story, warned the Japanese bank analyst, who requested anonymity, is far from over.

"The key thing here is how investor confidence and bank credit lines have been affected. And following Brazil, investor confidence is very jittery," he warned.

Asian regional currencies are currently being supported by large current account surpluses, he acknowledged. But over the next few months those will shrink as collapsed import levels pick up. Unless foreign inward investment recovers to take up some of the slack, Asian currencies will once again weaken, he cautioned.