Asian monies mixed following Japanese, U.S. comments
Asian monies mixed following Japanese, U.S. comments
SINGAPORE (Dow Jones): Asian currencies were mixed against the U.S. dollar in late trading Friday as markets digested the latest economic and political comments out of both the U.S. overnight and Japan during the trading session.
U.S. Federal Reserve Chairman Alan Greenspan said during Thursday's New York trading session that U.S. interest rates should probably be raised to waylay any "developing imbalances" that could hurt a percolating U.S. economy.
"There was nothing unexpected in his comments," said a currency strategist at a U.K. bank in Singapore. "It's only a matter of timing now for when the Fed raises rates."
Most economists and currency strategists expect the Fed to raise rates by 0.25 percent to 5.0 percent - either at the Federal Open Market Committee's meeting June 30 or the following one August 24.
While this would suggest the U.S. dollar might strengthen against global currencies, a trader at a U.S. bank in Manila said that "at the end of the day, the market has expected this and discounted it in most Asian markets."
He added that traders and investors are instead watching how the hoped-for resurgence in Asia's powerhouse, Japan, affects regional foreign exchange and equity markets.
Asia's regional markets should benefit from a U.S. rate hike or any Japanese move to keep the yen weak, analysts said.
"If the rate hike comes in and there is no sharp correction on Wall Street, then it will be a huge favor for Asian markets," said Jimmy Koh, chief economist at IDEA in Singapore. "The funds will continue to flow in to Asia as fund managers re-allocate portfolios in favor of the region's undervalued assets."
He said the U.S. dollar looks range-bound against the yen in the medium term, given the Bank of Japan's promise to guard against yen strengthening.
"What we will have is an outperformance in Asia equity markets, Koh said. "Given the low interest rate and weak currency environment, the stock markets are rightfully way up at this time, because it's the best place to put your money."
Nilesh Jasani, regional strategist at SG Securities in Singapore, said the sudden attention being thrown upon Asian markets means central banks are struggling to deal with capital inflows. South Korea's reserves have surpassed $60 billion; Thailand's are at $30 billion; and Singapore's are heading towards $80 billion.
"All central banks are going to be busy fighting this upward pressure on their currencies," he said.
In late trading, the U.S. dollar was trading at S$1.7075, up from S$1.7035 in late Thursday.
"It appears the central bank (Monetary Authority of Singapore) wants the U.S. dollar above S$1.700, but it will be a daily fight, given the strong inflows and rising equity market," Jasani said.
The Singapore Straits Times Index - up 104.8 percent in the past 12 months - climbed another 9.2 points to 2066 points Friday.
The U.S. dollar was also trading at 36.8650 baht, down a touch from 36.8750 baht late Thursday. Traders said U.S. funds have been eager to sell U.S. dollars, but Bank of Thailand buying agents in Singapore are keeping support for the U.S. dollar above 36.83 baht.
On the Philippine Dealing System, the U.S. dollar was trading at 37.810 pesos, up from 37.745 pesos late Thursday.
In North Asia, the U.S. dollar was trading at 1,163.7 won, down a touch from 1,167.0 won late Thursday. The U.S. dollar was also trading at 32.352 New Taiwan dollars, up from NT$32.252 late Thursday.