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.