Dollar rallies on BOJ intervention

Dollar rallies on BOJ intervention

Dow Jones, Jakarta

The dollar recovered from lows against most Asian currencies Friday in the wake of Japanese intervention, but ended mostly down in sluggish pre-World Cup soccer trade due to doubts about the strength of the U.S. economic recovery.

Comments from a senior U.S. official in The Wall Street Journal - which suggested Washington is unlikely to step in any time soon to help prop up the U.S. dollar - helped dampen the effect on Asian currencies of Japanese efforts to weaken its currency.

Without intervention from the administration of U.S. President George W. Bush - which has so far stayed out of tampering with the U.S. dollar's level - the U.S. currency is likely to continue to fall against the yen and other Asian currencies in the coming weeks, traders said.

Lingering doubts about the strength of America's current recovery from recession and Wall Street sluggishness - combined with signs of strength in Europe and even Japan - have led some investors to shift out of U.S. dollar-denominated assets in recent days.

Japan's Finance Minister Masajuro Shiokawa confirmed Friday that authorities intervened to sell U.S. dollars for the third time in a little over a weak amid concerns that a strong yen is hurting the country's nascent economic recovery.

The U.S. currency jumped over one yen to about 124.30 yen after the ministry bought U.S. dollars for yen, traders said. But the U.S. unit quickly fell back to just below 124 yen in late Asian trading, signaling the market remains bearish toward the dollar.

South Korea's won closed Asian trading at a fresh 17-month high against the U.S. dollar at 1,226.3 won compared with 1,229.5 won at Thursday's close.

The U.S. dollar came back from an intraday low at 1,222.50 won in line with the yen's slide, but exporter selling, and continued bearishness toward the U.S. economy kept the U.S. dollar under pressure.

Although South Korean stocks ended 2.4 percent lower Friday, the country's equity market has been a major beneficiary of the reallocation of assets out of the U.S. in recent weeks.

The New Taiwan dollar also ended stronger at NT$34.145 against the U.S. unit from NT$34.190 at the previous close, but off an intraday high of NT$34.048 on the Japanese intervention.

Only the Philippine peso ended lower, as the yen decline pushed the U.S. dollar to an intraday high at 50.470 pesos. The U.S. dollar ended at 50.250 pesos, off its high, but still up from 49.915 pesos at Thursday's close.

But the peso also took a hit from news that Hong-Kong listed First Pacific Co. is in talks with an "independent investor" to sell its holding in Philippine Long Distance Telephone Co. The market thinks local tycoon John Gokongwei might be bidding for the stake and will need to sell pesos to get U.S. dollars for the purchase through the market.

Indonesia's rupiah ended higher in line with the general weak sentiment toward the U.S. dollar in the region and as exporters moved foreign-currency earnings back home.

The rupiah was trading at a new nine-month high against the U.S. dollar late Friday in Asia at Rp 8,700, stronger than Rp 8,830 at Thursday's close.

Unlike its Asian counterparts, the rupiah failed to move on intervention against the yen. Indonesia's economy is perhaps the least linked to movements in the Japanese economy.

South Korean and Taiwanese currencies are particularly susceptible movements in the yen as the countries compete with Japan for export markets. Indonesia's economy, which is based on lower-end manufactured exports, has been generally decoupled from the yen this year.

Indonesia's cancellation of an auction of a 51 percent stake in PT Bank Niaga due to low bids this week has failed to immediately hurt sentiment toward the rupiah.

Moving ahead quickly with the sale is crucial to show Indonesia is still on track with asset sales needed to help its banking system back to health. But while the International Monetary Fund continues to support Indonesia, the downside for the currency remains limited.

The Singapore dollar was trading late Friday at S$1.7844 to the U.S. dollar, stronger than S$1.7890 late Thursday.

The U.S. dollar moved to an intraday high at S$1.7870 but the rise was short lived as market participants had anticipated Japanese intervention since early Friday and kept their positions thin, especially as the weekend approaches, dealers said.

The Thai baht closed at a 15-month high of 42.37 baht to the U.S. dollar late after hitting an intraday low around of 42.41 baht after the yen's fall. The dollar closed Thursday at 42.455 baht.