Asian monies down on fears of U.S. rate hike

Asian monies down on fears of U.S. rate hike

SINGAPORE (Dow Jones): Asian currencies slumped on Wednesday
as the dollar continued to build momentum ahead of next week's
expected interest rate hike in the U.S.

Local factors, such as political uncertainty in Indonesia and
a hostage crisis in the Philippines, also weighed on individual
Asian currencies.

The Singapore dollar fell to its lowest level in nearly a
year, while the Indonesian rupiah and Thai baht tumbled to their
lowest levels in roughly seven and five months, respectively.

The dollar held steady against the yen, remaining above a key
Y109 support level.

The Federal Open Market Committee, the U.S. Federal Reserve's
policy setting arm, is widely expected to boost short-term rates
by a half a percentage point when it meets on May 16.

"Going forward, most regional currencies will weaken across
the board as we move closer to the FOMC meeting," a dealer at a
foreign bank said.

A recent spate of strong economic data in the U.S. has boosted
market expectations that the Fed will have to tighten credit
aggressively to keep the economy from overheating.

The Singapore dollar dropped sharply in the first hour of
regional trading and remained pressured throughout the day. The
currency hit it's low point near the close of local trading when
the U.S. dollar rose to S$1.7308, its highest level since May 27,
1999 when it touched $1.7317.

Near the end of regional trading, the U.S. dollar slipped back
to S$1.7301, up from S$1.7250 late Thursday.

Such levels in the past would have surely triggered
intervention by the Monetary Authority of Singapore to support
the local currency. But analysts say recent weakness in the yen
and euro means the MAS probably has developed a higher tolerance
for U.S. dollar appreciation against the Singapore currency.

The rupiah also wilted under prospects of higher U.S. rates.
Additionally, the slide was exacerbated by lingering uncertainty
about the government's ability to bring about economic reform.

Late Wednesday the dollar was quoted at Rp 8,203, up from Rp
8,070 late Tuesday. Wednesday's closing level was the highest for
the U.S. currency since Oct. 15, 1999, when it reached Rp 8,260
in intraday trading.

In Manila, concern over a hostage crisis and fighting between
government and Muslim rebel forces in the southern Philippine
region of Mindanao added to the gloomy sentiment for the peso.

The dollar closed at 41.370 pesos on the Philippine Dealing
System, up from 41.279 pesos late Tuesday.

Traders said relatively thin demand for dollars and some banks
taking profits on recent gains in the U.S. currency helped
relieve pressure on the peso.

The Thai baht ended lower as dollar selling by local exporters
failed to offset a surge in the U.S. currency.

Late in the day the dollar rose to 38.955 baht, the highest
level since it touched 38.975 baht on Dec. 1, 1999. The baht
edged back at the close, with the dollar quoted at 38.915 baht,
up from 38.530 baht late Tuesday.

The New Taiwan dollar moved lower amid concerns over rising
tensions with mainland China ahead of the inauguration of
president-elect Chen Shui-bian on May 20.

The U.S. dollar closed at NT$30.697, compared with NT$30.690
Tuesday.

The South Korean won ended slightly higher following another
session of narrow range-bound trading, traders said.

The dollar finished at 1,109.10 won, down slightly from
Tuesday's close at 1,109.40 won.

Dollar selling by local exporters kept pressure on the U.S.
currency. In the afternoon, state-run Korea Development Bank
intervened in the market after the dollar hit an intraday low of
1,108.70 won, keeping the dollar above the 1,109 won level for
the remainder of the session.

Seoul financial markets will be closed on Thursday for a
holiday. Trading will resume on Friday.