Most Asian currencies rebound

Most Asian currencies rebound

HONG KONG (Dow Jones): Asian currencies strengthened Wednesday, recovering some of the ground lost in Tuesday's fall as short-term market players were forced to cut back their long positions in the U.S. dollar.

In Southeast Asia the baht, rupiah, Singapore dollar and Philippine peso all ended Asian trading hours higher on the day.

The rupiah closed slightly higher against the U.S. dollar in thin trading Wednesday as offshore participants cut their long positions in the U.S. dollar.

The dollar closed at Rp 7,280 in Asia trade, down from Rp 7,300 late Tuesday.

"Offshore participants, who were caught long on dollar liquidated their positions," said a dealer with a local bank.

Dealers said demand by local companies for the U.S. currency was slightly less than dollar offers as local businesses waited for the dollar to fall further before buying.

Dealers said the market shrugged off the lower-than-expected month-on-month inflation rate for November, as the market viewed the difference as benign.

The dollar is expected to trade between Rp 7,200 and Rp 7,400 Thursday, said dealers.

In North Asia solid investment inflows continued to support the South Korean won and the New Taiwan dollar.

Despite the regional rally Wednesday, many analysts maintained their view that Southeast Asian currencies will remain vulnerable to selling pressure through December.

"The fears over Y2K may be overdone, but the concern will remain at the back of traders' minds until the end of the year, and corporate customers will still want to buy dollars," warned Andrew Fung, treasury economist at Standard Chartered Bank in Singapore.

Over the coming weeks, Fung said dollar-buying could drive the U.S. currency above Tuesday's highs against the baht to reach levels between 39.50 baht and 40.00 baht.

Warnings that the baht could weaken further had little impact Wednesday, however, as market players who on Tuesday had gone short on the Thai currency were forced by rising costs to cut their positions, as demand for baht funding pushed offshore swap rates higher.

According to dealers, much of the dollar's slide against the baht was precipitated by sales from one U.S. bank which, having gone long on dollars Tuesday at levels above 39.00 baht, was forced Wednesday to cut its losses, selling to cover again at levels as low as 38.92 baht.

Toward the end of Asian trading the U.S. currency had fallen to 38.88 baht, down from 39.07 baht late Tuesday.

In North Asia a barrage of favorable economic data reinforced buoyant investor sentiment in the won, forcing the central bank to intervene in the Seoul market by buying dollars through local banks to check the won's rise.

By the close of local trading, the dollar had dropped to 1,157.30 won from 1,159.20 won the day before.

Inflows on Wednesday also lifted the New Taiwan dollar, which touched a new two-year high in intraday trading as the U.S. currency dropped to NT$31.648.

At the local close in Taipei, the U.S. dollar was quoted at NT$31.669, down from NT$31.672 Tuesday.