Asian monies up as U.S. rate cut hopes fade
Asian monies up as U.S. rate cut hopes fade
Dow Jones, Kuala Lumpur
Most Asian currencies tracked the Japanese yen higher Monday
as investors continued to unwind long U.S. dollar positions amid
diminishing hopes of a U.S. interest rate cut.
Investors are betting that U.S. stocks will slide if the
Federal Reserve opts to keep rates steady at its policy-setting
Open Market Committee meeting Tuesday, and that could pressure
the greenback.
Keeping U.S. rates unchanged would do little to lift the U.S.
economy, which in turn spells bad news for the rest of the world,
heavily dependent on the U.S. to buy their goods.
The anticipation the Fed would not cut rates kept market
participants in Asia jittery, currency strategists said. As a
result, dealings in Asian currencies were mostly thin and
cautious.
The Singapore dollar, Indonesian rupiah, Taiwan dollar and the
Korean won all ended the day higher. The Thai baht was also
stronger in offshore dealings with the domestic markets were
closed for a holiday.
However, the Philippine peso closed lower against the dollar
as budget concerns led cautious participants to cover their short
dollar positions.
Expectations are now focused on whether the Federal Open
Market Committee at its Tuesday meeting will move from a
'neutral' to an easing bias, which would suggest rates could
still be cut at a later stage.
But some say changing the bias without cutting rates might not
be the best solution.
In Singapore, market participants largely ignored strong
second-quarter economic data issued early Monday as the headline
figures were already announced by Prime Minister Goh Chok Tong in
his National Day speech late Thursday.
The Singapore economy expanded 3.9 percent on year in the
second quarter, higher than the 3.2 percent estimated earlier by
the government.
The Singapore dollar's strength against its U.S. counterpart
was due to trading leads from the U.S. dollar's swings against
its regional counterparts rather than the strong GDP numbers,
dealers said.
In late Asian trading, the dollar was quoted at S$1.7580, down
from S$1.7690 Thursday. Financial markets in Singapore were
closed Friday for the national day holiday.
The Indonesian rupiah also strengthened after the nation's
highest legislative body ended its 11-day annual convention over
the weekend without incident, which pointed to a lessening of
political risk.
Dealers said the rupiah was also boosted by small but
persistent flows of funds into the country, which they suspected
came from buyers of bank bad loans sold by the Indonesian Bank
Restructuring Agency recently.
Last month, IBRA raised over Rp 17 trillion from the sales of
bad loans. Most of the buyers are believed to be the original
debtors, who are now bringing back their cash to Indonesia to
settle the purchases.
The rupiah was also bolstered by remarks from the
International Monetary Fund, which said the government's efforts
to reduce the budget deficit to 2.5 percent of GDP this year from
3.7 percent last year is attainable.
Late Monday in Asian trading, the U.S. dollar was quoted at Rp
8,850, down from Rp 8,960 Friday.
The U.S. dollar also fell against the South Korean won, which
took its cue from the higher yen.
The Korean unit closed at 1,201.0 won, from 1,203.9 Friday
after trading between 1,196.7 won and 1,202.0 won.
The U.S. dollar ended at NT$33.870, down from NT$33.919
Friday. Dealings were valued at US$257 million, less than the
$316 million Friday.
A dealer at a local bank said the central bank bought U.S.
dollars to slow the local unit's rise, but the amount wasn't
large.