Asian monies down, won at 3-month low

Asian monies down, won at 3-month low

Dow Jones, Singapore

The South Korean won led Asian currencies broadly lower as the communist North's nuclear standoff with the U.S. intensified Thursday.

The main catalyst was a report by Japan's Kyodo news agency which said, without citing sources, that North Korea was preparing for a test launch of a medium-range Rodong missile.

The dollar closed at 1,210.5 won, up 11.3 won from Wednesday, and its strongest finish in three months.

Oil companies and offshore players scrambled to buy dollars early in the session, pushing the currency to a three-week intraday high of 1,213.0 won.

The dollar pulled back slightly on selling by exporters and profit taking above the 1,208-1,210 level, but was buoyed again late in the session on importer buying and short-covering activities by local players.

Bank of America, which has warned about the risks related to the North Korea tensions since late last year, said in a research report that "the market has only recently begun to realize the serious risks" after the U.S. deployed heavy bombers to the western Pacific "apparently to deter any North Korean aggression in the event of a war with Iraq."

Officials said the U.S. is basing more heavy bombers near North Korea and will formally protest the communist nation's "reckless actions" in using fighter jets to intercept a U.S. surveillance plane over the weekend.

With the dollar breaking past the key 1,210 won resistance, technical indicators suggest it is on course to target the 1,218.45 level, which is a 50 percent retracement of its October- January drop.

The dollar has now formed a clear uptrend line against the won from its January low of around 1,188 won, and this is evident in the rising yen-won cross rate, which has risen above long-term resistance near 10.20. The cross rate hasn't closed above this level on a weekly basis since last March.

Bank of Korea's decision to keep the overnight call rate unchanged at 4.25 percent didn't have any impact on the currency market, as the move was widely expected and "not a concern for the currency market," a Seoul-based dealer said.

The won's weakness spilled over into other regional currencies, in varying degrees.

A trader in Singapore said the dollar/yen, which generally provides broad direction to the market, did "nothing much to influence regional currencies today."

Meantime, security concerns triggered by the Tuesday bombings in southern Philippines dragged the peso to an all-time closing low of 54.850 peso to the dollar on the Philippine Dealing System, from 54.750 peso Thursday.

The New Taiwan dollar slipped as the won's fall triggered short covering in the U.S. currency, traders said. The U.S. unit closed at NT$34.668, up from NT$34.615 Wednesday.

"When I went home yesterday, most people (interbank traders) had short positions, and everybody was short covering today" because the won was hurt by heightened tensions on the Korean peninsula, said a dealer at a European bank in Taipei.

Local players monitor the won because Taiwan and South Korea compete in many export categories.

Against the Indonesian rupiah, the dollar closed at Rp 8,872, from Rp 8,870 Wednesday.

Elsewhere, the U.S. unit was quoted at S$1.7343 against the Singapore dollar late in the local session, up from S$1.7328 late Wednesday.

Against the Thai baht, the dollar was quoted around 42.58 late in Asia, from 42.525 baht at the previous session close.