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.