Asian monies weighed down by U.S. dollar, local issues
Asian monies weighed down by U.S. dollar, local issues
SINGAPORE (Dow Jones): The U.S. dollar's resurgence against the yen during Asian trading hours Tuesday undermined recent gains made by other regional currencies.
The Singapore dollar, Thai baht, Philippine peso and Korean won all fell sharply as the U.S. dollar climbed as high as 106.63 yen in intraday trading. The Indonesian rupiah and New Taiwan dollar ended nearly flat.
Traders said the dollar rose on the back of the Group-of-Seven industrialized countries' meeting over the weekend, when Japan said it would be prepared to provide ample market liquidity to cap yen strength.
In late trading, the U.S. dollar was trading at 106.57 yen, well up from 104.11 yen in late Asian trading Monday.
Traders and currency strategists said a stronger U.S. dollar only added to downward pressure on currencies already being weighed down by domestic issues.
"It is a domestic story: Political uncertainty in Indonesia, doubts about bank reform and recovery in Thailand and South Korea, and official support for a weaker Singapore dollar to enhance competitiveness. All of these issues combined to make the regionals weaker today," said Ryan Padgett, treasurer at Bank Brussels Lambert in Singapore.
He said Indonesia's problems continue to compound because of the government's reluctance to release the findings of a PriceWaterhouseCoopers report on Bank Bali, unrest associated with the East Timor situation, and uncertainty over how the presidential nomination process will progress.
In late trading, the U.S. dollar was trading Rp at 8,485, almost unchanged from Rp 8,486 late Monday. Traders said the extremely thin, choppy market amplified moves in the currency, with small U.S. dollar or rupiah orders placing undue pressure on pricing.
The U.S. dollar was also trading at 41.2650 baht, up from 40.7350 baht on Monday.
On the Philippine Dealing System, the U.S. dollar was trading at 40.943 pesos, up from 40.73 pesos in late Asian trading Monday.
Padgett said that for the moment, countries such as the Philippines and Thailand are experiencing a lull in foreign capital inflows. He said many overseas fund portfolios are now fully invested in regional markets, following the frenzied buying activity earlier in the year.
The U.S. dollar was trading at S$1.7129, up from S$1.7038 Monday. Traders said the U.S. dollar easily moved higher because of market awareness that the government is keen to keep the Singapore dollar competitive with other regional currencies.
"The Singapore dollar went right along with the baht today," said a trader at a U.S. bank in Singapore.
In other markets, the U.S. dollar was trading at 1,215 won, up from 1,210.8 won late Monday.
The Bank of Korea said Tuesday that a weakening won in conjunction with the yen's recent strength - climbing as high as 103.98 yen against the U.S. dollar this week - could put upward pressure on prices in South Korea, given the country's dependence on capital goods imported from Japan.
He said this trend would continue if Japan continues to steadfastly ease fiscal policy without a corresponding easing in monetary policy.
"This policy mix is yen supportive and at the same time reduces regional growth prospects," he said. Historically, the South Korean central bank has tried to keep the ratio consistent at about 10 to one, given that the country competes with Japan in nearly half its exports.
The U.S. dollar was also trading at NT$31.797, almost unchanged from NT$31.795 in late Asian trading Monday.