Asian monies down on yen, rupiah pressures

Asian monies down on yen, rupiah pressures

Netty Ismail, Dow Jones, Singapore

Renewed strain on the yen and the Indonesian rupiah dealt a double whammy to other Asian currencies late Tuesday, superseding the market's recent fixation with the Sept. 11 attacks in the U.S.

Participants have toned down their bearish views on the U.S. dollar as they become less risk averse, leading them to shift their attention back to the region's gloomy fundamentals.

In the wake of the deadly terrorist attacks in New York and Washington, investors had sold dollars and sought refuge in safe- haven investments like current account surplus currencies.

Uncertainty over how far the U.S. would go in retaliating for the attacks and fears of a global recession had kept the market wary.

But "the calm and logical response by the U.S. administration has instilled a calmer mood in the financial markets, a U.S. dollar positive factor," said BNP Paribas in a report.

As some of the "risk-aversion trades" - inspired last month by the heightened global uncertainty - were being unwound, current account surplus currencies like the Singapore dollar were starting to get hit again, said Mansoor Mohi-uddin, a regional currency strategist.

"We're not seeing any military action off our TV screens," he said. "So people are switching to fundamentals again."

The absence of intervention by some of the region's central banks Tuesday - in particular the Monetary Authority of Singapore and the Bank of Thailand - also emboldened participants to push the U.S. dollar higher, market watchers said.

Talk of intervention by these central banks last week had hitherto restrained U.S. dollar bulls.

Renewed pressure on the yen and the rupiah prodded U.S. dollar bulls into action again, dealers said.

At 0908 GMT (or 1608 p.m. Jakarta time), the U.S. dollar was quoted at 120.71 yen, above 120.24 yen late Monday in New York. The U.S. dollar was at 119.75 yen late Monday in Tokyo.

The Indonesian currency slumped past the psychologically important level of 10,000 rupiah to the U.S. dollar to trade at three-month lows on security concerns, sparked by rising anti- U.S. protests in Indonesia.

The U.S. dollar was quoted at Rp 10,015 after trading as high as Rp 10,120 earlier Tuesday. Late Monday, the U.S. dollar was at Rp 9,880.

As it lost its appeal as a safe-haven currency, the Singapore dollar felt the brunt of the selloff in the region's foreign exchange markets, skidding to its lowest level in nearly two months.

The absence of central bank intervention Tuesday when the U.S. dollar hit S$1.7750 - the suspected level of intervention last week - encouraged participants to push the U.S. currency higher, triggering stop-loss orders, dealers said.

U.S. dollar bulls were, however, wary of steering the currency toward S$1.7800 amid fears of provoking U.S. dollar sales by the Monetary Authority of Singapore, given the precipitous fall in the local currency, dealers said.

The U.S. dollar rose to as high as S$1.7790, before stabilizing around S$1.7774 late Tuesday. The U.S. dollar was quoted around S$1.7674 late Monday.

The Thai currency was quoted at 44.690 baht to the U.S. dollar, weaker compared with 44.520 baht late Monday.

On the Philippine Dealing System, the U.S. dollar ended at 51.600 peso, higher than 51.400 peso Monday.

The central bank was rumored to have sold dollars around 51.600 peso earlier Tuesday to defend the local currency, dealers said.

The New Taiwan dollar sagged as it succumbed to the yen's weakness and a 4 percent plunge on the local stock market, dealers said.

The U.S. dollar finished at NT$34.574, higher than NT$34.549 Friday, in dealings valued at US$244 million. Taipei's markets were closed Monday for a national holiday.

The central bank, which regularly intervenes to smooth any currency volatility, sold an estimated $100 million throughout the session to cushion the New Taiwan dollar's fall, dealers said.

South Korean markets remained closed for a three-day holiday, and will reopen Thursday.

Asian currencies have largely priced in expectations of another interest rate cut by the U.S. Federal Reserve, which has been compelled to take a much more aggressive easing stance since the Sept. 11 attacks.

The Fed is expected to cut interest rates later Tuesday, for the ninth time this year, with most investors wagering on a half- percentage-point reduction to 2.5 percent in the federal funds, or overnight bank-lending rate.