Asian monies soften, U.S. dollar shines

Asian monies soften, U.S. dollar shines

SINGAPORE (Dow Jones): Southeast Asian currencies ended Asian trading hours on Wednesday a touch softer against the U.S. dollar, as the market returned to bidding up the U.S. currency against Asia as a whole.

With the U.S. dollar's luster burnished by Alan Greenspan's testimony before Congress on Tuesday, in which the Federal Reserve chairman hinted at a more hawkish stance towards U.S. monetary policy, traders said that the U.S. currency was once again appearing attractive relative to Asia's regional currencies.

In Southeast Asia, renewed U.S. dollar bids pushed the Singapore dollar to a fresh five-month low, while in North Asia both the South Korean won and the new Taiwan dollar declined.

The Indonesian rupiah closed slightly higher against the dollar in quiet dealings Wednesday as state banks and some offshore participants sold the U.S. currency.

The dollar closed at Rp 8,820 in the spot market for the Asian session, down a bit from Rp 8,850 Tuesday.

"Although earlier this week the dollar broke Rp 9,000, the market still perceives the level is a resilient resistance," said a dealer with a foreign bank. "The central bank faithfully guards the rupiah at Rp 9,000," the dealer said.

Dealers said that as the dollar loses steam against the rupiah at Rp 9,000, the rupiah's high yield will become a good reason for investors to buy the currency.

Although a liquidity squeeze helped the Thai baht claw back some of its recent losses at the open, not even short-term funding costs as high as 30 percent proved sufficient to deter the dollar bulls, and the baht surrendered its early gains later in the day.

Despite the market's enthusiasm for the U.S. dollar, trading activity was generally subdued. Of the Asian regional currencies, only the baht and Singapore dollar attracted appreciable levels of interest.

At the start of Asian trading a flurry of U.S. dollar sales pushed the U.S. currency sharply lower against the baht.

Traders attributed the U.S. dollar selling to offshore players forced to exit their short positions in the Thai currency after the baht interest rates implied by tomorrow/next day baht swap rates rose to levels as high as 30 percent late Tuesday.

Despite the high costs of funding short baht positions, the U.S. dollar found support at its early intraday low of 37.31 baht, and recovered during the session to end Asian hours at 37.5650 baht, up a touch from 37.5150 baht late the previous day.

With short-term Singapore dollar interest rates hovering around 1 percent, funding costs were no deterrent to market players seeking to sell the Singapore short.

Heavy U.S. dollar purchases, executed, according to traders, by U.S. investment houses in Hong Kong, propelled the Singapore currency to a fresh five-month low in afternoon trading.

Late in Asian trading the U.S. dollar had eased slightly to trade at S$1.7255, up from S$1.7192 late Tuesday.

Most traders remain bullish on the U.S. currency's short-term prospects, with a trader at a Singapore bank saying: "The market may test S$1.7280, but at S$1.7300 there is major resistance."

The U.S. dollar also made gains elsewhere in the region.

Against the Philippine peso, the U.S. currency ended the trading day at 39.09 pesos, up from 38.99 pesos at Tuesday's close.

In North Asia, both the new Taiwan dollar and the South Korean won slipped. In Taipei the U.S. currency ended at NT$33.083, up from NT$33.028 the day before. In Seoul the U.S. dollar closed at 1,217.50 won, compared with 1,212.50 won on Tuesday.