DJ Asian Currencies Up Late; Fading Rate Cut Hopes Hit Dlr
DJ Asian Currencies Up Late; Fading Rate Cut Hopes Hit Dlr
Dow Jones
Singapore
Asian currencies strengthened across the board Friday as
fading hopes of a U.S. interest-rate cut next week damped
investors' appetites for the dollar.
Speculation that the Federal Reserve might trim short-term
rates to reinvigorate the U.S. economy had underpinned the dollar
earlier in the week.
Those hopes were dimmed, however, by articles in Friday's
Washington Post and The Wall Street Journal that deemed a further
reduction to the 1.75 percent Federal Funds rate as unlikely when
Fed policy makers meet next Tuesday.
The articles, which appeared on the newspapers' Web sites
during Asian trading hours provided an impetus to sell the
dollar, analysts said.
"It was the trigger for players to cut their positions," said
Masmichi Koike, senior vice president and head of foreign
exchange spot trading at Sumitomo Mitsui Bank in Tokyo.
The feeling among market players had been that a U.S. "rate
cut would boost both Treasurys and equities and therefore help
the dollar," Bank of America said in a note to clients.
Both articles laid out arguments for why a rate cut is
unlikely, citing recent economic data, as well as speeches and
testimonies by various Fed governors.
Although many analysts had already discounted the chances for
a rate cut next week, the fact that two influential newspapers
came out with the message on the same day caught the market's
attention.
The dollar fell against both the yen and the euro, lending
weight to the U.S. currency's bearish tone in the region. Trading
was generally subdued, however, with foreign exchange markets in
Singapore closed for a public holiday.
Against the South Korean won the dollar closed at 1,203.9 won,
down from 1,206.8 won late Thursday.
The yen's rise prompted players in Seoul to unwind their long-
dollar positions against the won. The won often tracks the yen
because South Korea and Japan compete in similar export markets.
Dollar selling by exporters also contributed to the won's
rise, dealers said.
The Philippine peso weakened to its lowest level of the year
before rebounding in the afternoon session as banks took profits
on the dollar.
The dollar closed at 51.670 peso on the Philippine Dealing
System, down from 51.770 peso Thursday.
The peso's early slippage was attributed to investor concerns
regarding falling portfolio inflows and the country's swelling
budget deficit.
The government said Friday it again failed to meet its tax
revenue target in July, suggesting that the budget deficit could
badly overshoot its ceiling for the year despite repeated pledges
of fiscal prudence.
The dollar rose to a high of 51.940 peso before the profit
taking set in.
Central bank Governor Rafael Buenaventura said the monetary
authority didn't intervene to support the peso, but was
monitoring the currency's performance against its regional peers.
The New Taiwan dollar was bolstered by the stronger yen and a
rise in the local stock market.
The U.S. dollar finished at NT$33.919, down from NT$33.998 at
Thursday's close.
The main index of the Taiwan stock market closed up 3.2
percent, helping to boost sentiment toward the local currency.
The Thai baht was slightly stronger, prompting central bank
Governor Pridiyathorn Devakula to say the currency has stabilized
against the dollar.
"We have been monitoring the baht movement. It hasn't been
volatile," Pridiyathorn told reporters. Officials previously
expressed concern that if the baht appreciates too rapidly
against the dollar it could hurt the competitiveness of the
country's exports.
Near the end of Asian trading the dollar was quoted at 42.445
baht, down from 42.475 baht late Thursday.