Most Asian monies fall against US dollar

Most Asian monies fall against US dollar

HONG KONG (Dow Jones): The won surged to its highest level in
over two months Thursday after the South Korean government
announced an extensive package of measures aimed at stabilizing
the country's shaky financial markets.

Other Asian currencies fared less well, falling back against
the dollar as the U.S. currency bounced higher against the yen in
response to a rally in U.S. asset markets.

The Korean government's announcement that it will inject
trillions of won into investment trust companies faced with mass
redemptions following the financial collapse of the Daewoo Group
triggered what observers described as a powerful relief rally in
the local currency.

Won-buying by both domestic and international market players
forced the U.S. currency down steeply as the Seoul stock market
leapt by 2.8 percent.

From 1,193.00 won at the open, the dollar tumbled to an
intraday low of 1,184.40 won, its weakest against the won since
Sept. 3, before pulling back slightly in late trading to end the
session at 1,184.90 won.

At Wednesday's close, the won was quoted at 1,191.90 won.

The won's rally was reinforced by the government's pledge to
buy unlimited amounts of bonds from investment trusts on demand
and to maintain interest rates at current single-digit levels.

"The important thing here is that the government is trying to
stabilize the financial markets" to avert an asset price spiral,
said Chris Tinker, head of fixed income research at Credit
Lyonnais Asia in Hong Kong.

Other analysts agreed, saying the government's move to absorb
much of the risk of Daewoo's bad debt is positive for the South
Korean economy and for the won.

"The weakness of Korea's financial market is acting as a
bottle neck which is threatening to drain the whole recovery
process," said Steven Xu, treasury economist at Standard
Chartered Bank in Hong Kong. "The government has no choice, but
to nationalize the debt."

Elsewhere Asian regional currencies failed to match the won's
advance.

In Taipei the New Taiwan dollar slipped back, ending an
extended unbroken bull run.

Traders blamed the local currency's fall on the 1.5 percent
decline in the Taipei stock market, coupled with continued U.S.
dollar purchases by the central bank.

None doubted, however, that the New Taiwan dollar would resume
its upward trend in the near future.

According to Xu at Standard Chartered, the authorities'
repeated foreign exchange market interventions to suppress the
New Taiwan dollar's appreciation have injected so much liquidity
into Taiwanese money markets that the central bank is finding it
impossible to absorb the excess through debt issuance.

As a result domestic overnight interest rates have fallen
below the central bank's target rate of 4.8 percent.

"The central bank doesn't want interest rates to fall any
further, but it can't target both the interest rate and the
exchange rate," Xu said. "It will have to allow the currency to
appreciate."

Stripped of the central bank's support, the U.S. dollar will
fall "rapidly" to NT$31.50 and then to NT$31.00, Xu predicted.
At Thursday's close the U.S. currency was at NT$31.732, up from
NT31.722 the previous day.

In Southeast Asia, the Indonesian rupiah lost ground despite a
sharp rally in local stocks powered by thawing relations between
Jakarta and the International Monetary Fund.

Despite market talk of substantial flight capital
repatriation, dollar sales were outweighed by demand for the U.S.
currency from Indonesian corporations and from market players
looking to exit short positions.

Late in Asian trading, the dollar was quoted at Rp 6,800, up
from Rp 6,735 the day before.

Southeast Asia's other currencies maintained their recent
tight ranges.

Late in the day, the dollar was quoted against the Thai baht
at 38.6900 baht, down a fraction from 38.6950 baht the previous
day.

Against the Singapore dollar, the U.S. currency was at
S$1.6660, down from S$1.6682 the day before.

Against the Philippine peso the dollar closed at 40.095 pesos,
down from 40.120 pesos at the end of Wednesday's session.