Asian monies down on concern central banks will sell

Asian monies down on concern central banks will sell

Christina Soon,
Bloomberg/Singapore

Asian currencies fell on speculation the region's central
banks will sell them to protect exporters after the Wall Street
Journal said South Korea, China and Japan voiced concern about
the dollar's decline.

"The recent dollar depreciation is huge and that may affect
Korean and other countries' exports," Go You Sun, an economist at
Dongwon Securities Co., said in Seoul. "Most Asian central banks
will try to boost the dollar's value."

The won fell 0.1 percent to 1,048.20 against the dollar as of
4 p.m. Seoul time, its biggest drop since Nov. 19, according to
Seoul Money Brokerage Services Ltd. The currency has climbed
almost 14 percent this year, making it the world's third-best
performer after the Polish zloty and South Africa's rand.

Taiwan's dollar slid 0.2 percent to NT$32.205, according to
Taipei Forex Inc. The Singapore dollar declined 0.2 percent to
S$1.6417.

South Korean President Roh Moo Hyun, Prime Minister Junichiro
Koizumi of Japan and China's Premier Wen Jiabao came to an
"understanding" on the dollar's slide when they met privately at
the Association of Southeast Asian Nations summit in Laos, the
Journal reported.

Koizumi said they should jointly try to stabilize currencies,
the newspaper reported after the weekend meeting.

Asian currencies, bar the Sri Lankan rupee, rose against the
dollar in the past month, with the Korean won having biggest
monthly gain since it rebounded from its slump during the Asian
financial crisis, prompting government officials to threaten
dollar buying to prevent the erosion of export earnings.

South Korea's Deputy Finance Minister Chin Dong Soo yesterday
said won gains are "too steep." The ministry is working closer
with the central bank and the government will take "more active
measures" to curb the appreciation of the currency, he said.

The won had a monthly gain of 6.4 percent, its biggest since
July 30, 1998. The gains in November arose partly as exporters
such as LG Electronics Inc., concerned the currency would rise
further, exchanged their foreign-currency profits. A rising won
saps the foreign-exchange proceeds companies get from their
earnings abroad.

Taiwan's central bank may try to stem currency gains because
of the threat to growth and exports, the Commercial Times
reported on Nov. 27, without saying where it obtained the
information.

Jan Lambregts at Rabobank said quickening inflation may deter
central banks from selling their currencies.

"Countries may be worried about inflation, with high oil and
commodity prices," said Lambregts, head of Asia Pacific research
in the treasury department of Rabobank in Singapore. "They will
be less keen to intervene" and buy dollars "like they did one,
one and a half years ago when inflation was less of a problem."

Currencies also fell on speculation China won't adjust its
fixed exchange rate soon. Chinese Premier Wen on Nov. 28 said
speculation about when the country may change the yuan's peg to
the dollar makes it harder to alter the currency system.

China needs "a stable macroeconomic environment, a normal
market mechanism and a healthy financial system" before it alters
the peg, Premier Wen said at the Asean summit in Vientiane, Laos.