Asian monies down, dollar questioned
Asian monies down, dollar questioned
Alan Yonan Jr., Dow Jones, Singapore
The dollar held its ground against most Asian currencies Thursday, although many analysts questioned whether its recent rally is sustainable.
After sinking to multi-month lows against several regional currencies the dollar has stabilized over the past few sessions as the outlook for U.S. equity markets has perked up.
With many players short dollars globally, the dollar rally picked up steam quickly on short-covering against not only Asian currencies, but those in Europe as well.
The latest batch of good news for the dollar came in the form of a 7.8 percent surge in the NASDAQ Composite Index and a 3.1 percent rise in the Dow Jones Industrial Average overnight.
The dollar rallied to a two-week high against the yen early in the Asian session, putting most other Asian currencies on the defensive.
The Singapore dollar, Taiwan dollar, Philippine peso and Thai baht all tumbled, while the Korean won edged higher. Markets in Jakarta were closed for a public holiday and rupiah was confined to illiquid offshore trade.
Near the end of Asian trading, the dollar was quoted at 128.85 yen, unchanged from late Wednesday in New York. The dollar had hit a high of 129.15 yen early in the day before Japanese exporters began selling the U.S. currency to hedge their foreign exchange exposure.
Until it's latest rally, market sentiment was clearly running against the U.S. dollar due to concerns about the strength of the economic recovery in the U.S. and the sustainability of the country's current account deficit.
"But for now it appears that the reversal will be short-lived if U.S. equity markets cannot follow through and concerns continue over the resilience of the recovery in the United States," according to the bank.
The Singapore dollar bounced around for most of the session, then slumped near the end of trading to finish at a one-week low against its U.S. counterpart.
The U.S. dollar's stellar performance overnight helped it open at a solid S$1.8095 in Asia. A bout of profit-taking pushed the U.S. currency down to its intraday low S$1.8060 before it began to climb again on the strength of its advance against the yen.
Near the end of Asian trading the U.S. dollar was quoted at S$1.8114, up from S$1.8092 late Wednesday.
Traders in Manila said most banks took the dollar's rebound against the yen and other currencies as a signal to cover their short dollar positions against the peso.
The dollar closed at 49.890 pesos on the Philippine Dealing System, up from 49.820 pesos Wednesday.
The Philippine market didn't react to comments from some government officials that the budget deficit for the first quarter may have exceeded the 52.9 billion pesos ceiling.
The government had warned the market earlier about front- loading expenditures to stimulate the economy, so Thursday's announcement didn't come as a surprise, Bank of America said in a note to clients.
The New Taiwan dollar faced selling pressure both in the spot market and the offshore market for non-deliverable forwards.
The U.S. dollar closed at NT$34.605, up from NT$34.588 Wednesday.
As was the case in other regional foreign exchange markets, U.S. dollar short covering was the driving force behind the U.S. currency.
The Thai baht traded in a narrow range, finishing marginally weaker. Near the end of Asian trading the dollar was quoted at 42.950 bath, up from 42.945 bath late Wednesday.
The South Korean won managed to break from the influence of yen weakness and finished stronger on the back of dollar selling by exporters.
The dollar ended at 1,282.4 won, below Wednesday's close at 1,285.4 won.
Exporters normally offload dollars at the end of the month, when they must balance their books. But the dollar's recent volatility has prompted some exporters to sell the U.S. currency on any price spikes.
The exporters' activity helped offset the negative effect on the won resulting from net foreign sales of 96 billion won of shares in the local stock market.