Dollar overcomes early loses

Dollar overcomes early loses

Alan Yonan Jr, Dow Jones, Singapore

The dollar recovered from early losses to finish mixed against Asian currencies Wednesday.

The dollar was weaker across the board in early Asian trading, but capitalized on its gains against the yen later in the session to close higher against the South Korean won and Thai baht.

The Singapore dollar, New Taiwan dollar, Philippine peso, and Indonesian rupiah strengthened modestly against the dollar.

The peso rallied for the third straight session, even as the Congressional Planning and budget office cautioned that the government's 2002 budget deficit could widen substantially if tax collection doesn't improve.

The dollar closed at 51.900 pesos on the Philippine Dealing System, down from 52.100 pesos a day earlier.

A study prepared by the budget office warned that the deficit could balloon to 172 billion pesos, well beyond the 150 billion pesos to 155 billion pesos that most private analysts are forecasting.

The budget deficit for the first seven months of the year stood at 133 billion pesos, exceeding the government's full-year target of 130 billion pesos.

"The market's response, or rather lack of it, seems to suggest that it is already braced for the worst, or maybe that it would like to wait to get a clearer picture to emerge on the extent of the deficit overshoot," Bank of America said in a daily research note.

For his part, Finance Secretary Jose Isidro Camacho said he wouldn't declare the budget shortfall "unmanageable" because doing so would only hurt business confidence.

While such a declaration would give the federal government the legal authority to reduce payments to local governments that are fixed by law, the net result would be negative, Camacho said.

"Whatever you gain from that may not be enough to compensate for the backlash it might have on the confidence of corporations and local governments," he said.

The won suffered from yen weakness and foreign selling of shares in the local stock market.

The dollar closed at 1,201.0 won, up from 1,200.0 won at Tuesday's close.

The won opened firmer at 1,195 per dollar in line with the yen's initial strength, but lost ground as the Japanese currency faltered in the afternoon session.

The dollar traded as high at 118.65 yen in Asia, compared with 118.14 yen late Tuesday in New York.

In addition, foreigners were net sellers of local shares for the third straight day Wednesday, bringing the three-day total to 336 billion won in net sales.

The New Taiwan dollar gave up most of its early gains, but still managed to close a touch stronger against the dollar.

The U.S. currency ended at NT$34.230, compared with Tuesday's close of NT$34.236.

The dollar hit an intraday low of NT34.165 early in the day, but battled back as the local currency was hit by outflows of foreign equity funds and the weaker yen.

The Singapore dollar held its ground against the U.S. currency in a quiet, range bound session, dealers said.

Late in Asia the U.S. dollar was quoted at S$1.7488, down from S$1.7537 late in Asia Tuesday.

The rupiah gained on dollar selling by state banks, possibly at the request of the central bank, traders said.

The dollar ended at Rp 8,880, down from Rp 8,905 at Tuesday's close.

The dollar was pulled off its intraday high at Rp 8,900, on dollar selling by state banks.

Traders said the selling was likely on behalf of the central bank to help keep the lid on dollar strength.

With a lack of fresh leads to drive baht trading, the currency weakened a trough in tandem with the softer yen.

Near the end of Asian trading the dollar was quoted at 42.425 bath, up from 42.235 bath late Tuesday.