Japan-U.S. talks leave Asian money markets in suspense
Japan-U.S. talks leave Asian money markets in suspense
SINGAPORE (Dow Jones): Southeast Asian currencies were mixed against the U.S. dollar in late trading on Thursday, as investors await news to emerge from Japan Prime Minister Keizo Obuchi's meetings today with U.S. President Bill Clinton.
Traders and economists expect the Tokyo meeting to touch on the U.S. government's eagerness for Japan to get its economic house in order - and sooner rather than later.
The discussion comes on the heels of an announcement late this afternoon that the Liberal Democratic Party and the Liberal Party have agreed to form a coalition government before the start of the next regular session of parliament, as well as review the contentious 5 percent consumption tax, which many were expecting to be cut in the latest Japanese economic stimulus package, announced last week.
In late trading, the U.S. dollar was in danger of slipping below 120 yen, trading at 120.35 yen, down from 121.47 yen late Wednesday.
The bilateral discussion in Tokyo is one of many to be conducted this week so "watch out for comments from them, in particular Clinton's visit to Japan and mention of trade liberalization," said Thio Chin Loo, an economist at Banque Paribas in Singapore, adding that Japan will most likely try to convince the U.S. of its attempts to stimulate growth.
The other bilateral discussions being held this week include: Canadian Prime Minister Jean Chretien in China, Korean President Kim Dae Jung in Hong Kong and U.S. Secretary of State Madeleine Albright in Indonesia.
Economists said the other key factor is - as always - the U.S. market and this week's U.S. Federal Reserve decision to cut the Fed funds and discount rates to 4.75 percent and 4.50 percent, respectively, economists said.
If you work under the assumption that this is the last easing in 1998, then the U.S. equity market could be looking vulnerable," said Ryan Padgett, treasurer at Bank Brussels Lambert in Singapore. "If the Dow (Jones Industrial Average) is unable to stay above 9,000, then we could see it down sharply, and that would be negative for the dollar, especially if it falls below 120 yen, as people start building in more expectations of another rate cut."
That would likely mean regional equity markets and domestic currencies will continue to be insulated from volatile swings. If anything, central banks and monetary authorities in the region will have to be vigilant, economists said, in keeping domestic currencies stable and competitive.
In late trading on Thursday, the U.S. dollar was trading at 36.2550 baht, unchanged from 36.2500 baht late Wednesday.
The U.S. dollar was also trading at 7,525 rupiah, up a touch from 7,469 rupiah late Wednesday.
"The rupiah is performing surprisingly well given the civil unrest this past week," said a trader at a Japanese bank in Singapore, referring to last week's People's Consultative Assembly meeting, which sparked off widespread student demonstrations, leading to the death of more than a dozen people.
The U.S. dollar was trading at S$1.6315, down from S$1.6337 late Wednesday.
"The Singapore dollar continues to get support from the government despite weak economic data," Padgett said.
On the Philippine Dealing System, the U.S. dollar was trading at 39.73 pesos, down from 39.95 late Wednesday.
Meanwhile, in North Asia, the South Korean won continues its climb unabated. The U.S. dollar was trading at 1,287.1 won, down from 1,294.7 won on Wednesday.
The U.S. dollar was also trading at 32.438 New Taiwan Dollars, down from NT$32.533 late Wednesday.