Japan intervention spoils party for regional bulls

Japan intervention spoils party for regional bulls

HONG KONG (Dow Jones): Massive intervention by the Bank of
Japan to push the yen lower spoilt what would otherwise have been
a field day for Asian regional currency bulls Monday.

The Indonesian rupiah, the Singapore dollar, the Philippine
peso and the new Taiwan dollar still managed to end Asian hours
higher on the day, despite the Japanese central bank's action.

But the South Korean won and the Thai baht both closed lower
in parallel with the yen.

Monday's trading started on a strongly positive note for
regional currencies. The admission over the weekend by
Indonesia's governing Golkar party that it had lost last week's
parliamentary elections, boosted the rupiah to its highest level
in six months.

The rupiah's climb, which saw the U.S. dollar fall to Rp 7,525
in early dealing, boosted the Singapore dollar too.

As the U.S. dollar came under pressure against the yen,
falling to a low of 117.91 yen in early trading, the U.S.
currency was also sold down against the Singapore dollar. As
successive stop-loss sales orders were triggered in thin market
conditions, the U.S. dollar dropped to a one-month low of
S$1.7040, according to brokers on the island republic.

The U.S. dollar's fall against the regional currencies was
soon arrested, however, as the Bank of Japan's dollar-buying
intervention prompted market players to cover their short
positions in the U.S. currency in regional foreign exchange
markets.

As the U.S. dollar was propelled back up to levels approaching
121 yen against the Japanese yen, it was also pushed higher
against the Singapore dollar as market players scrambled to cover
their exposure, hitting a high of S$1.7160.

With chastened dealers reluctant to establish fresh positions,
in case market volatility again catches them wrong-footed, the
U.S. dollar is likely to remain range-bound against the Singapore
currency in the near term. According to one trader at a Singapore
bank, market participants will be content to restrict themselves
to playing a S$1.7050 to S$1.7150 band over coming sessions,
unless the dollar moves decisively higher against the yen.

Late in Asia the U.S. currency was quoted at S$1.7125, just a
fraction lower than S$1.7135 toward the end of local trading
Friday.

Short-covering also lifted the U.S. dollar off its intraday
low against the Indonesian rupiah. Dealers described the U.S.
currency's rally as halfhearted, however, saying that fresh
sellers capped the dollar's rise around Rp 7,600.

News that presidential front-runner Megawati Soekarnoputri had
flown to Singapore for a medical check-up failed to lend the
dollar any extra upward momentum, leading dealers to predict that
the U.S. currency was set for another fall.

"The dollar's lack of bounce makes me think it could be coming
lower," said one trader at a U.S. bank in Singapore, warning that
if the U.S. currency falls through the Rp 7,500 level, it will
encounter little support above Rp 7,200.

Late in Asian trading, the U.S. currency was quoted at Rp
7,565, down from Rp 7,711 toward the end of local trading Friday.

Among other regional currencies, the Philippine peso
appreciated against the U.S. dollar despite the yen's slide, as
the central bank's latest round of interest rate cuts on Friday
helped attract foreign funds into local asset markets.

At the end of domestic trading in Manila, the U.S. dollar was
quoted at 37.855 pesos, down from 37.900 pesos at Friday's close.

The Thai baht, however, failed to hold on to gains made on
Friday, slipping back in line with the fall in the yen.

Late in Asian dealing, the U.S. dollar was quoted at 36.9700
baht, up from 36.9250 baht late on Friday.

In North Asia, the South Korean won also fell back in response
to the Bank of Japan's intervention, with the U.S. dollar rising
to close at 1,170.00 won, up from 1,167.60 won on Friday.

The new Taiwan dollar, however, shrugged off the fall in the
yen, as buying from local exporters repatriating foreign currency
revenues and from foreign institutions investing in Taiwanese
equities lifted the local currency.

At the close, the U.S. dollar was quoted at NT$32.427, down
from NT$32.459 at the end of the previous session.