Most asian currencies up late as S&P downgrade hurts rupiah
Most asian currencies up late as S&P downgrade hurts rupiah
SINGAPORE (Dow Jones): Asian currencies were mostly higher
late Tuesday, buoyed by a rebound in most regional bourses after
a hammering a day earlier.
A recovery on Wall Street Monday after record points losses in
major indexes Friday helped lift regional stocks and currencies
with the exception of Jakarta equities and the rupiah, which both
sank after Standard & Poor's Corp. downgraded Indonesia's credit
rating.
The Dow Jones Industrial Average Monday rose 276.7 points to
end at 10,582.5, while the technology-laden Nasdaq jumped 217.9
points to 3539.2.
Jakarta stocks and the rupiah fell after S&P cut its long-term
foreign currency issuer credit rating on Indonesia to SD, or
selective default, from CCC+, and lowered its short-term foreign
currency issuer rating to SD from C.
While the downgrade was expected after the government last
week rescheduled $5.8 billion worth of sovereign debt with the
Paris Club of creditors, there was a "knee-jerk" response in
financial markets, says a rupiah trader in Singapore, who
declined to be named.
Syetarn Hansakul, East Asia analyst at WestLB, said the
downgrade doesn't reflect sudden negative risks emerging.
"The original (Paris Club) loans are technically in default
until banks are officially notified of the rescheduling, which
will be done soon, therefore we expect rupiah weakness to be
temporary," she said.
"Once the facts are clarified, the rupiah should head toward
7,600."
The dollar late in the day was quoted at Rp 7,725 rupiah, up
from Rp 7,670 a day earlier. The JSX Composite Index fell 0.5
percent to 526.7 from 529.3.
Among the other Asian currencies, the Singapore dollar was the
standout performer as it surged to a two-month high late in the
day against its U.S. counterpart at S$1.6970, up from S$1.7055
late Monday.
Traders said heavy buying of the Singapore currency by
European banks pushed it through the psychological level of
S$1.7000 against the U.S. dollar.
The Monetary Authority of Singapore, which market participants
say intervened last week around S$1.7200 to support the local
dollar, may be promoting a stronger currency in a bid to control
inflation in the wake of much stronger than expected consumer
price index data from the U.S. Friday.
It may also be providing liquidity to offset a spate of recent
foreign acquisitions by companies including Singapore Airlines
and Singapore Telecommunications, know as SingTel, traders say.
A 0.6 percent rise in the benchmark Straits Times Index of
share prices to 2,010.7 after an 8.7 percent slump Monday also
aided the Singapore dollar.
Elsewhere in the region, a 5.6 percent jump in the Korea
Composite Stock Price Index, or Kospi, to 747.3 after an 11.6
percent fall a day earlier lifted the won.
Buying of South Korean bonds after a statement Monday by the
Bank of Korea - the nation's central bank - that it wouldn't
tighten monetary policy also aided the currency, according to
market participants.
"Some institutional investors expanded their bond buying,"
said Kim Il-soo, a broker at Hyundai Securities Co.
The yield on three-year corporate bonds ended down seven basis
points to 9.97 percent while the yield on three-year government
bonds ended 11 basis points lower at 8.93 percent.
At the close of trade in Seoul, the dollar was quoted at
1,110.4 won, down from 1,113.8 won late Monday.
The U.S. dollar ended at NT$30.517 against the New Taiwan
dollar from NT$30.555 previously. Against the Philippine peso, it
closed at 41.175 pesos from 41.190 pesos and against the Thai
baht, it ended at 37.870 baht, down from 37.885 baht previously,
on solid stock market gains in each country.