Most Asian monies down, dollar short covering ends
Most Asian monies down, dollar short covering ends
Alan Yonan Jr., Dow Jones, Singapore
The dollar weakened against most Asian currencies Monday, snapping a two-session rally as risk aversion returned to the forefront of investors' minds.
The Indonesian rupiah was the only regional currency unable to advance against the dollar.
The U.S. currency's recent gains had stemmed mostly from position short covering, which took the spotlight off of a host of dollar-negative factors.
Much of the risk aversion toward the dollar stems from a perception that a U.S.-led invasion of Iraq is becoming increasingly unavoidable, analysts said.
Also weighing on the dollar are tensions on the Korean Peninsula, and concerns about the strength of the U.S. economic recovery.
"It seems clear that last week's dollar rally was little more than a washout of short positions, and that the structural dollar downtrend remains intact," UBS Warburg said in a research note.
Continued U.S. troop mobilization, more hawkish rhetoric from President George W. Bush toward Iraq, and a new suicide bomb attack in Israel are all keeping the Middle East issue fresh in investor's minds, UBS Warburg said.
The dollar could face additional pressure if corporate earnings are disappointing when the reporting season gets into full swing in the second half of January.
However, one possible bright spot for the dollar this week could come in the form of a fiscal stimulus program President George W. Bush is expected to unveil Tuesday in an attempt to reinvigorate the lackluster U.S. economy.
The South Korean won didn't rely solely on negative dollar news to boost its fortunes. The currency was underpinned by the second straight day of capital inflows to the local stock market.
The dollar closed at 1,188.9 won, down from 1,196.9 won, late Friday.
The New Taiwan dollar powered its way to a seven-week high against its U.S. counterpart.
The U.S. dollar ended at NT$34.645, compared with NT$34.806 at Friday's close.
In addition to the general anti-U.S. dollar mood dominating trading, local exporters were selling the U.S. currency and stocking up on local dollars to ensure they had enough cash to pay staff bonuses ahead of the Chinese Lunar New Year, traders said.
The Singapore dollar tracked other regional currencies higher, but its gains were limited by concerns about the health of the local economy.
Late in Asia the dollar was quoted at S$1.7380, down from S$1.7443 late Friday in Asia.
On the other hand, fundamental economic concerns have also kept the local dollar from chalking up any significant gains since the start of the new year.
The Singapore economy is estimated to have expanded 2.2 percent in 2002, but economic growth is expected to be bumpy at least until the second half of 2003.
The Thai baht also moved in tandem with its regional peers with a dearth of domestic developments to influence trading.
Toward the end of Asian trading the dollar was quoted at 42.835 baht, down from 43.030 baht late Friday.
Dollar demand from Indonesian corporations prevented the rupiah from following the lead of its regional counterparts.
Near the end of Asian trading the dollar was quoted at Rp 8,935, up from Rp 8,915 late Friday.
There were some concerns in financial markets that street protests over recent hikes in fuel prices and utility tariffs could get out of hand.
Hundreds of demonstrators took to the streets in several major Indonesian cities to protest the increases. However, the protests remained peaceful.