Asian monies mixed; U.S. rate worries remain

Asian monies mixed; U.S. rate worries remain

SINGAPORE (Dow Jones): Asian currencies were mixed late
Thursday, as investors remained guarded on expectations the U.S.
Federal Reserve could resume its rate tightening cycle.

Asian currencies barely reacted to the Federal Open Market
Committee's vote, at the end of their two-day meeting Wednesday,
to hold the key federal funds rate steady at 6.50 percent.

The Fed had implemented six interest-rate increases since June
1999.

"I don't think it's so much of a surprise," said David
Simmonds, currency strategist at Citibank. "Regional markets will
still remain somewhat wary on the view that U.S. interest rates
will have to rise further - we're still expecting another 75
basis-point hike before we hit the peak," Simmonds said.

Indeed, the Fed warned of a rise in August if inflation
pressures grow. The predominant risks facing the economy, the
Fed's policy-making arm said, "continue to be weighted mainly
toward conditions that may generate heightened inflation
pressures."

With widespread expectations that U.S. rates could still rise
further and as investors shift their focus back to domestic
developments in the region, most Asian currencies are expected to
come under pressured over the next two months, analysts said.

The Indonesian rupiah felt the brunt of the pressure due to a
multitude of political and economic concerns that point to more
bearishness for the beleaguered currency, dealers said.

High on the list of immediate concerns: whether Indonesia
would be able to rush through its economic reforms over the
coming week so a new letter of intent with the International
Monetary Fund could be signed mid-July. This would pave the way
for a loan disbursement in August, dealers said.

An imminent downgrade in the ratings on DSPL Finance Co. BV's
US$150 million senior secured notes due 2010 to D from CC by
Standard & Poor's Corp. added to the anxiety, dealers said.

The expected downgrade reflects the expectation that DSPL will
be unable to make its first principal payment of about US$1.6
million to noteholders due Friday, S&P said.

Around 0915 GMT, the dollar was at Rp 8,735, up from Rp 8,687
late Wednesday. The U.S. currency's recent attempt to move above
Rp 8,700 had recently been impeded by dollar-selling by state
banks and offshore players.

However, the U.S. currency's ascent Thursday, which was fueled
mainly by Jakarta-based corporates buying dollars, found little
resistance Thursday.

"Tomorrow (Friday), I'm targeting Rp 8,800," a dealer at a
U.K. bank said.

In the Philippines, an impending domestic oil price increase
following hints by three major oil refiners they may raise prices
of their products dented the peso, dealers said. Fears of more
bombings by Muslim rebels and tight dollar liquidity had also
rattled investors, they added.

The dollar closed at 43.170 pesos, up from Wednesday's close
of 43.100 pesos.

The Thai baht slipped to 39.165 baht against the dollar, from
39.120 baht late Wednesday, on the weaker end of its recent
trading range amid heightened political uncertainty following the
resignations of opposition members of parliament.

Against the Singapore dollar, the U.S. currency was marginally
weaker, after failing, yet again, to stay above S$1.7350. The
U.S. currency was at S$1.7344, down slightly from S$1.7353 late
Wednesday.

U.S. dollar-selling by local exporters lifted the South Korean
won and the New Taiwan dollar, dealers said.

Against the South Korean currency, the dollar finished at
1,114.90 won, down from Wednesday's close at 1,116.20 won.

Vis-a-vis the New Taiwan dollar, the U.S. dollar eased to
NT$30.808, compared with Wednesday's close of NT$30.810.