Asian monies weaken, central banks may sell their currencies

Asian monies weaken, central banks may sell their currencies

Christina Soon, Bloomberg, Singapore

The Singapore dollar fell, leading its Asian counterparts lower, after the government said regional central banks may sell their currencies to help sustain export-driven economic growth.

Demand from investors abroad has helped fuel a 12.9 percent gain in the benchmark Straits Times Index of Singapore equities in the past three months, and a 1.7 percent increase in the currency.

``They're just being careful not to let this hot money flow into their currencies,'' said Erik Herzfeld, head of Singapore options dealing at J.P. Morgan Chase & Co. `` Otherwise, the appreciation will be too fast.'' Currency sales ``will continue to be the theme.'

The Singapore dollar fell 0.4 percent to S$1.6961 against the U.S. currency at 4:02 p.m. local time. The won weakened 0.1 percent to 1,171.55, according to Seoul Money Brokerage Services Ltd.

Strengthening currencies raise the cost of a country's exports for consumers abroad, making it tougher for regional economies to rely on sales overseas to bolster economic growth.

Record foreign-currency reserves in South Korea and Taiwan and rising holdings in Singapore suggest their central banks have been selling their currencies for dollars, according to Jimmy Koh, head of treasury research at UOB Group, an affiliate of United Overseas Bank Ltd., Singapore's second-largest lender.

Singapore's government raised its economic-growth projection for this year to as much as 5.5 percent on expectations of rising worldwide demand, versus 1.1 percent in 2003. The island's exports last month rose a seasonally adjusted 3.6 percent from December.

``We expect Asian central banks to intervene heavily,'' Friedrich Wu, director of Singapore's Ministry of Trade and Industry economics division, said at a press briefing. The Monetary Authority of Singapore declined to comment on its currency policy.

Fourth-quarter gross domestic product rose an annual 11 percent in Singapore, a second quarter of expansion, after surging a revised 16 percent in the July-September quarter, the Trade and Industry Ministry said in a statement.

Growth was faster than the government's earlier estimate of an annual 7.9 percent expansion in the final quarter of 2003 and topped the median forecast of seven economists in a Bloomberg News survey for an annual 9 percent expansion.