Asian monies drift sideways, won and Taiwan dollar rally
Asian monies drift sideways, won and Taiwan dollar rally
SINGAPORE (Dow Jones): Southeast Asian currencies ended Asian
hours mixed against the U.S. dollar Wednesday, as trading in
regional markets was slow to restart after Tuesday's holidays.
Unsure exactly how Brazil's floating of the real, which was
confirmed late Monday, will affect medium-term sentiment toward
Asia's crisis-hit economies, traders and investors were reluctant
to build fresh positions in the regional markets.
As a result, Southeast Asian markets drifted sideways, leaving
the Singapore dollar a touch higher on the day, while the Thai
baht, the Indonesian rupiah and the Philippine peso all finished
a fraction weaker.
In North Asia, however, the South Korean won and the New
Taiwan dollar rallied strongly, prompting Steven Xu, treasury
economist at Standard Chartered Bank in Hong Kong, to forecast
that the two currencies will soon retest long-term highs against
the U.S. dollar.
"Brazil's devaluation will not be a one-day event," he warned.
"Despite the impressive damage-control measures being taken, over
the coming weeks the dollar will be dragged lower against the
yen, which will benefit both the won and the New Taiwan dollar."
Even following Fitch IBCA's decision Tuesday to upgrade South
Korea's sovereign debt rating to investment grade, the market is
still overpricing Korean risk, Xu argued.
As the risk premium being placed on Korean investments shrinks
to a more reasonable level, says Xu, so the won will strengthen,
with the U.S. dollar falling back toward the 13-month low of
1.147.50 won it hit Jan. 7.
At the close of domestic trading Wednesday, the U.S. dollar
was quoted at 1,165.50 won, compared with 1,175 at Tuesday's
close.
Although Ron Leven, regional currency strategist at J.P.
Morgan in Singapore, agrees that the won is likely to test fresh
highs in the near future, he is less certain about the New Taiwan
dollar's chances of appreciating much further.
"Taiwan is more problematical. The government has been very
aggressive about keeping the currency and interest rates down,"
he said.
Nevertheless, the New Taiwan dollar was also stronger against
the U.S. dollar Wednesday, with the U.S. currency ending domestic
trading at NT$32.263, down from NT$32.291 at Tuesday's close.
In the longer term, however, the Taiwan currency remains
vulnerable to slowing global electronics demand. And as a major
investor and exporter, Taiwan is also exposed to fears that China
will be forced to devalue the yuan, abandoning its unofficial peg
of 8.28 yuan to the U.S. dollar.
Those fears have intensified in the wake of Brazil's flotation
of the real.
Although many market players favor the Philippine currency
over the new Taiwan dollar, the peso failed to hold its own on
Wednesday, slipping back against the U.S. dollar.
At the close of trading on the Philippine Dealing System, the
U.S. currency was at 38.37 pesos, up from 38.36 at Tuesday's
close.
The Thai baht also eased slightly, with the U.S. dollar rising
to end Asian interbank trading at 36.5100 baht, up from 36.4650
late Tuesday.
The rupiah, too, ended weaker, pushed lower by U.S. dollar-
buying interest from Singapore-based players, although with the
Jakarta market closed Wednesday for a holiday, volumes were
extremely light.
As trading in Singapore ended, the U.S. dollar was quoted at
Rp 8,470, up from Rp 8,355 late on Tuesday.
While currencies elsewhere in Southeast Asia eased against the
U.S. dollar, the Singapore dollar pushed a touch higher, although
most traders complained the market was range-bound.
Late in Asian trading hours, the U.S. currency was quoted at
S$1.6800, down a fraction from S$1.6845 toward the end of
Tuesday's thin holiday trading.