Intervention steadies U.S. dollar in Asia

Intervention steadies U.S. dollar in Asia

Dow Jones, Singapore

The struggling U.S. dollar stabilized against Asian currencies Thursday with the help of foreign exchange market intervention by monetary authorities in South Korea and Taiwan.

The U.S. dollar finished Asian trading hours little changed against the won, New Taiwan dollar, Singapore dollar and Thai baht, after falling to multimonth lows against all four a day earlier. The Indonesian rupiah and Philippine peso weakened.

However, any strengthening of the U.S. dollar is likely to be short lived because the underlying sentiment in global markets continues to be biased heavily against the U.S. currency, analysts said.

U.S. dollar buying by state-run Korean banks saved the U.S. currency from posting a new low against the won. The state run banks swung into action after the U.S. dollar fell to around 1,172 won early in the session after closing a 19-month low of 1,179.4 won a day earlier.

Traders said they believed state-run banks bought around $500 million on behalf of the government. The move helped the U.S. currency rebound to close at 1,179.5 won.

A senior Bank of Korea official later hinted at the government's involvement in the round of U.S. dollar buying, saying it is "natural" for the government to take actions to stabilize exchange rates "when market participants lose their balance."

Governments in Korea, Taiwan and Japan have all intervened either directly or indirectly in foreign exchange markets recently to slow the rise of their currencies.

Authorities have expressed concern that rapid appreciation of their currencies could undermine the price competitiveness of their exporters in global markets.

The Singapore dollar tracked its north Asia counterparts to remain steady against the U.S. dollar.

Late in Asia the U.S. dollar was quoted at S$1.7502, compared with S$1.7505 late Tuesday.

An announcement by the Monetary Authority of Singapore that it will maintain its neutral policy on the Singapore dollar on a trade-weighted basis for the balance of 2002 had little immediate impact on the currency.

However, over the longer term it means there will be room for the currency to continue appreciating against the U.S. dollar, analysts said.

JP Morgan is targeting the U.S. dollar to fall to S$1.72 by the end of September and S$1.70 by the end of December.

Singapore's large current account surplus, healthy foreign reserves, and balanced budget are all supportive of the local currency because they make Singapore less vulnerable to volatility in global capital flows, she said.

Against the New Taiwan dollar, the U.S. currency closed at NT$33.284 compared with NT$33.282 Wednesday.

The central bank, which regularly intervenes in the market to smooth out volatility, bought around US$700 million throughout the day, dealers said.

The New Taiwan dollar would have substantially eclipsed its 14-month high set Wednesday if not for the central bank's actions to prop up the U.S. dollar, one trader said.

Against the rupiah the U.S dollar broke through the key Rp 9,000 resistance level for the first time in six sessions.

A 1.4 percent decline in the main index of the Jakarta Stock Exchange and U.S. dollar short covering weighed on the rupiah.

At the end of Jakarta trading the U.S. dollar was quoted at a two-month high of Rp 9,125, up from Rp 8,915 late Wednesday.

Bank Indonesia, the central bank, was rumored to have sold the U.S. currency to try to keep the rupiah below 9,000 per U.S. dollar, traders said.

The U.S. dollar traded in a narrow range against the baht, finishing the session at 41.160 baht, compared with a 22-month low of 41.150 baht Wednesday.