Asian monies plunge against dollar amid market worries
Asian monies plunge against dollar amid market worries
SINGAPORE (Dow Jones): Southeast Asian currencies were well down against the U.S. dollar in late trading Wednesday, as the market grappled with the double-barreled news of the Bank of Japan's multi-billion dollar market intervention Tuesday to prop up the U.S. dollar and Brazil's imploding economic woes.
In Tokyo, the dollar was quoted at 111.53-57 yen, down from 112.53-55 yen in mid-morning trade and 112.38 yen in New York late Tuesday.
"The intervention of the Bank of Japan to slow the speed of the U.S. dollar's descent against the yen may have put a temporary floor for the dollar at Y110... Whether this turns out to be a cyclical bottom remains doubtful," said Thio Chin Loo, currency strategist at Banque Paribas in Singapore.
In late trading, the U.S. dollar was trading at S$1.6855, well up from S$1.6791 late Tuesday, in the aftermath of Tuesday's yen surge by the U.S. dollar.
"The currency has been used for a number of long trades on other regionals, but it's not unexpected that with the Japanese authorities stepping in to provide a floor for the U.S. dollar that these funding trades would lighten up a bit," said Clifford Tan, an economist at Warburg Dillon Read in Singapore. "I think the (Singapore) government would be happy to see the U.S. dollar at S$1.70, then take a fresh look at economic developments in the first half of 1999."
Other economists are also looking for a substantial depreciation in the Singapore dollar, given the recessionary pressure on the economy at the moment. The government's cost- cutting measures announced late last year will effectively close the gap between wage earnings and productivity, a treasury economist at a UK bank said, but that will simply fuel the deflationary pressures now seen in the republic.
The U.S. dollar was also trading at 36.9550 baht, up from 36.3750. "As with the rupiah and Singapore dollar, investors are covering short swap positions, which tends to push the spot market rate down (against the U.S. dollar)," said a trader at a Japanese bank in Singapore.
The U.S. dollar also climbed on fears that the Bank of Thailand would actively buy dollars to continue to pay off forward obligations, as well as on signs that interest rates will fall further after the Krung Thai Bank's 50 basis point lending rate cut took effect today.
"Thailand's repayment of foreign debt progressed as the state- run Financial Sector Restructuring Agency signed contracts Tuesday to sell some 156 baht billion of business loans stripped from 56 defunct finance firms with seven institutional investors," a treasury economist at Standard Chartered Bank said.
The U.S. dollar was also trading at 38.550 pesos, up from 37.925 pesos late Tuesday. Traders and economists said the country's relatively small economy has once again been buffeted by events in the region.
"It's not surprising that the peso is somewhat directionless at the moment; if the dollar falls back towards Y108 tomorrow, it could well move higher," said a trader at a UK bank.
"The peso has been benefiting these past six months from U.S. dollar weakness; if the U.S. dollar strengthens, as we expect it to do later this year, then the peso could be heading lower," said O'Donoghue.
The government's announcement today that the country's PHP52.7 billion budget deficit exceeds the ceiling of 49 billion pesos set by the IMF also helped push the peso down, traders said.
In North Asia, the U.S. dollar was trading at 1,172.6 won, down slightly from 1,173.3 won Tuesday. The U.S. currency was also at 32.212 New Taiwan dollars (NT), up a touch from NT32.189 yesterday.