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.