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.