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.