Asian monies mostly lower despite yen rebound

Asian monies mostly lower despite yen rebound

Dow Jones, Singapore

Despite a recovery in the Japanese yen, most Asian currencies that were open for trade Tuesday posted mild losses against the U.S. dollar.

Traders said corporate demand for dollars in the Philippines and Thailand weighed on their currencies, while the Indonesian unit was unchanged.

Trading volumes across the region were lower than normal as markets in China, Malaysia, Hong Kong, South Korea, Taiwan and Singapore were closed for Lunar New Year holidays.

Most markets in the region will remain shut Wednesday.

The yen rose against the dollar, helped by repatriation flows as Japanese companies sought to improve their balance sheets ahead of the fiscal year-end book-closing on March 31.

Concerns about credit quality in the U.S. banking sector, specifically unconfirmed rumors that a major institution might be downgraded by rating agencies due to its exposure to corporate failures including Enron, K-Mart and Global Crossing, also dented sentiment toward dollar-yen.

In the shorter term, the dollar is likely to continue its correction against the yen, as concerns over developments in Argentina and the widening Enron scandal in the U.S. cloud the outlook for the greenback, said Noriyuki Fujita, head of foreign exchange at Societe Generale in Tokyo.

Late Tuesday, the Japanese government released a study paper which calls on the government and central to take drastic steps to clear bad loans from banks' balance sheets and provide liquidity to financial markets to prevent the economy from falling into a deflationary spiral.

The government study paper, warning of a vicious circle of price falls and economic deterioration, was scant on details but is expected to lay the groundwork for promised steps to combat deflation. The paper was presented to a meeting of Prime Minister Junichiro Koizumi's top economic panel, which Economy Minister Heizo Takenaka said would flesh out anti-deflation measures. That package, expected out this week, reportedly will include steps to accelerate bad loan disposals, perhaps including the use of taxpayers' money to replenish banks' depleted capital.

At 0930 GMT (4.30 p.m. Jakarta time) the dollar was at 133.40 yen, down from 134.45 yen a day earlier.

Recent yen weakness - due in part to a perceived Ministry of Finance policy to help Japan export its way out of recession - hurt Asian currencies, preserving some of their exporters' price competitiveness versus Japan.

The rise in the yen Tuesday, however, failed to lift the peso and baht as corporate dollar demand remained strong.

The dollar closed at 51.340 pesos on the Philippine Dealing System, up from 51.315 pesos Monday.

Traders said corporate demand for dollars was strong under 51.400 pesos.

The baht was marginally lower against the U.S. dollar late in Asian spot trade at 43.93 compared to 43.885 baht a day earlier.

The rupiah was flat against the dollar at 10,200, helped by suspected dollar sales by agents of the Indonesian Bank Restructuring Agency, which lifted the local currency from its session low.