Asian monies sidelined; market watches the yen

Asian monies sidelined; market watches the yen

SINGAPORE (Agencies): Southeast Asian currencies were largely
directionless during Asian trading hours on Friday, as regional
markets played second fiddle to the see-saw swings of the U.S.
dollar against the yen.

And with market participants deeply divided over the future
direction of the Japanese currency and the dollar, few traders or
analysts were willing to predict the tone of the regional foreign
exchange markets over the coming week.

"Most of the Asian regionals are sidelined at the moment by
the moves in the dollar/yen," said one trader at a U.S. bank in
Singapore, explaining that with the market's attention focused
elsewhere, there is little interest in taking positions in Asian
regional currencies.

The one exception appears to be the Singapore dollar. After it
dropped by around 1.2 percent in the first week of the year, the
majority of market participants confidently expect the Singapore
currency to weaken further in the short to medium term.

"Regardless of where the yen goes, the general tone of the
Singapore dollar is going to remain soft," Vincent Low, foreign
exchange and interest rate analyst at Merrill Lynch in Singapore
was quoted by Dow Jones Newswires as saying.

Also pressuring the local currency, argues Chia Woon Khien,
Singapore-based regional treasury economist at Skandinaviska
Enskilda Banken, are significant outflows of funds from Singapore
to the surrounding region.

Over the past few months Singapore companies have invested
heavily in corporations in Thailand and elsewhere in Southeast
Asia, most recently on Thursday when Singapore Telecom announced
the acquisition of a S$500 million 20 percent stake Thailand's in
Advanced Info Service Public Co.

Late in Asia on Friday the U.S. dollar was quoted at S$1.6726,
up moderately from S$1.6690 towards the end of local interbank
trading on Thursday.

While traders and analysts showed a fair degree of consensus
over the future path of the Singapore dollar, calling the
direction of Asia's other regional currencies proved more
difficult.

Most analysts agree, however, that the strength or weakness of
the yen relative to the U.S. dollar will continue to be the
dominant influence, especially on the North Asian currencies.

Should the yen continue its upward trend, with the U.S. dollar
falling to around Y105, central banks around Asia are likely to
find themselves battling to slow the appreciation of their own
currencies, say market participants.

"For Asian governments, last year's dream of a stronger yen is
in danger of turning into this year's nightmare," said Chia at
Enskilda.

Thai baht ended lower Friday in Asian spot trading, following
the U.S. dollar's movements against the yen in a narrow range,
dealers said.

The dollar finished at 36.40 baht, up from 36.275 baht at the
close of trading in Bangkok on Thursday.

Other Asian currencies also ended generally lower in line with
the yen, which came under selling pressure on rumors that global
rating agency Moody's was to downgrade Japan's sovereign debt
rating.

The yen ended Asian trading here at 111.58 against the dollar
from New York's close of 111.00 and Singapore's close of 110.60
on Thursday, AFP reported.

The dollar had surged to the 112.10 level fueled by the
rumors about Moody's alleged downgrade, a dealer with a European
bank said.

Rupiah also closed lower at 8,000 from 7,970 and the South
Korean won at 1,175 from 1,157.

The won weakened after the government stepped into the foreign
exchange market for the first time in a year to ease the unit's
alarming rally, dealers in Seoul said.

It had traded around 1,400 won to the dollar for most of the
second half of 1998 but has soared in recent weeks.

The Philippine peso was higher at 38.04 from 38.38 to the
dollar and the Taiwan dollar firmer at 32.158 from 32.17.