Most Asian currencies weaken as U.S. dollar gains strength
Most Asian currencies weaken as U.S. dollar gains strength
SINGAPORE (Dow Jones): The U.S. currency's rebound against the yen during Asian trading on Friday also saw the dollar rally against many of Asia's regional currencies.
The Singapore dollar, the rupiah and the New Taiwan dollar all slipped back in parallel with the yen. And even though the Philippine peso, the baht and the won succeeded in gaining ground against the U.S. currency, many market observers are now questioning whether the recent rally in the regional currencies is topping out.
Asian regional currencies have strengthened markedly since the Federal Reserve began trimming U.S. interest rates late last month, precipitating an abrupt 18 percent slide in the U.S. currency against the yen.
"The U.S. stepped in and cut interest rates, which led the yen to strengthen. That triggered a rally in Asian regional currencies, allowing monetary authorities across the region to cut interest rates, injecting liquidity into the system and strengthening stock markets," explained Chua Soon Hock, chief strategist at Sanwa Bank in Singapore.
Now, however, with the dollar surging up through Y119 in Asia on Friday, and many analysts targeting a return to levels around Y125, market participants are beginning to wonder whether the regional currencies' bull-run is ending.
In late trading in Tokyo, the dollar was trading at 119.12-15 yen, up from 117.82 yen in New York and 117.70-74 yen here late Thursday.
"The regional currencies will certainly give up some of their recent gains if the yen retraces to Y125" to the dollar, predicted Prasenjit Basu, Singapore-based regional economist at Credit Suisse First Boston. But although mildly negative for the regional currencies, a dollar rebound against the yen is unlikely to trigger dramatic slides elsewhere in Asia, Basu argues.
In fact, some market participants argue, a modest dollar rebound against the yen may help dampen regional volatility and usher in a period of relative currency stability. After weeks of volatile trading, the Singapore dollar, for example, is seen re- establishing itself as one of the steadiest currencies in Asia.
During Asian hours, the U.S. currency has tended to hold steady or strengthen, in response to buying from Singapore banks.
Late in Asia Friday, the U.S. dollar was trading at S$1.6275, up from S$1.6236 at the same time Thursday.
Although Asian trading Friday saw the Thai currency strengthen against the U.S. dollar, market players are beginning to worry that the baht, too, is looking dangerously top-heavy.
Late in Asia, the U.S. dollar was trading at 37.60 baht in the offshore market, down from 37.69 baht towards the end of the previous Asian session.
The level of the rupiah is causing less concern. Although it ended lower, the Indonesian currency remained relatively flat through Friday's session, in marked contrast to the rollercoaster volatility seen earlier in the week, when it strengthened by nearly 10 percent on Wednesday, only to hand back all its gains the following day.
"A lot of people who went short the dollar got a bloody nose," when the U.S. currency rebounded on Thursday, said a trader at a U.S. bank in Singapore. Nursing their wounds, those players are now holding back from the market; liquidity has dropped, spreads have widened, and trading has once more ground to a near standstill, according to traders.
Late in the Asian day, the U.S. dollar was quoted at Rp 7,887, up from Rp 7,725 the day before.
Elsewhere in Asia, the New Taiwan dollar finished lower against the U.S. currency, shadowing the fall of the yen. At the close of domestic trading the U.S. dollar was quoted at NT$32.898, up from NT$32.878 the day before.
The Philippine pesos, however, bucked the regional trend, finishing strongly higher, on healthy inflows attributed to remittances from Filipino expatriates.
At the close of trading on the Philippine Dealing System, the U.S. currency was quoted at 42.050 pesos, down from 42.605 pesos at Wednesday's close. Trading was suspended on Thursday as Filipinos braced themselves for the onset of Typhoon Babs.
In Seoul, the won also finished higher, on dollar sales attributed to local exporters. At the end of the day, the U.S. dollar stood at 1,316 won , down from 1,323 won the previous day.