Asian monies up on Fed cut, Singapore dollar falters

Asian monies up on Fed cut, Singapore dollar falters

Dow Jones, Singapore

Most Asian currencies were buoyed Thursday by the bigger-than-
expected U.S. Federal Reserve's rate cut overnight, which caused
the dollar to slip further against the yen in Asia.

But many of the regional units were off highs late in the
session as some dollar demand reemerged. The Singapore dollar
gave up all its early gains and returned to a softer tone.

Late Thursday, the U.S. dollar was quoted around S$1.7642,
rebounding from a session low of around S$1.7580, and up from
S$1.7614 late Wednesday.

A trader at a European bank in Singapore said U.S. investment
houses bought U.S. currency during the session, which helped it
rebound against the local dollar.

Generally though, "people are seeing the Fed rate cut as
positive in terms of increased fund flows to the region for
potentially higher yields," said Steve Brice, Standard Chartered
Bank's chief economist for Southeast Asia.

The policy-making Federal Open Market Committee late Wednesday
delivered a surprise 50 basis point interest rate cut, double
what most analysts had anticipated.

The aggressive action did spark fear that the U.S. economy is
in worse shape than predicted, which would have negative
repercussions for the region's trade-dependent economies.

But some analysts said the Fed's action seems aimed at
boosting confidence, and is likely a preemptive strike to bolster
the flagging economy. More importantly, they pointed out that the
Fed has moved back to a neutral bias.

Still, many expect the upward momentum of regional currencies
to be reined in by broader economic concerns.

Market players are also waiting to see if the European Central
Bank and the Bank of England will follow suit and cut rates later
Thursday. Many also expect Asian central banks to take similar
action, a fact that will also likely weigh on regional
currencies.

In Korea the dollar ended at 1,217.2 won, down from
Wednesday's close at 1,222.2 won, after trading between 1,214.1
won and 1,220.0 won.

Salomon Smith Barney/Citibank, in a report late Thursday, said
it expects rate cuts in the region, but that would be more likely
linked to expected weaker economic conditions rather than a knee-
jerk response to the Fed's move.

Taiwan, Thailand and Malaysia are expected to shadow the Fed's
move, but not as aggressively, unless the yen strengthens
dramatically, which Salomon doesn't foresee.

Meanwhile, the New Taiwan dollar ended at a month-and-a-half
high against the U.S. currency after foreign banks sold U.S.
dollars following the Fed's rate cut, dealers said.

The U.S. dollar ended at NT$34.596, down from NT$34.685
Wednesday, after trading between NT$34.587 and NT$34.643.

In Thailand, the dollar ended the Asian session at 43.23 baht,
down from 43.31 baht Wednesday, echoing its general weakness in
the region.

Elsewhere, the dollar ended at 52.870 peso on the Philippine
Dealing System, down from 52.940 peso the previous day.

The dollar was little changed against the Indonesian rupiah in
sluggish trade, ending at Rp 9,210, a tad down from Rp 9,215
Wednesday.

There was dollar demand from local importers to finance the
purchase of food commodities ahead of religious and new year
festivities next month.

But this was offset by offshore selling as players unwound
dollar-long positions.

Underlying sentiment for the rupiah remains bearish, with
foreign investors expected to be further deterred by the Oct. 12
deadly bombing in Bali.

Data from the state investment board Thursday showed foreign
direct investment approvals dropped 11 percent to US$5.40 billion
in the first nine months of 2002 due to lingering social unrest,
thriving labor dispute and a weak legal system.