Most Asian monies up on yuan talk

Most Asian monies up on yuan talk

Dow Jones, Singapore

Strong equity markets and talk of a Chinese yuan revaluation lifted most Asian currencies on Tuesday even though Chinese authorities quashed the speculation.

The South Korean month won finished at its highest since early February, and the New Taiwan dollar closed at its strongest since late January. The Singapore dollar, Thai baht and Indonesian rupiah eked out modest gains, but the Philippine peso ended little changed.

Analysts said any yuan revaluation is likely to be upwards and would also lead to a rise in Asian units against the U.S. dollar.

The market has been speculating about a potential widening of the yuan's trading band against the U.S. dollar for several days. The momentum picked up after U.S. Treasury Secretary John Snow said overnight that China is interested in moving toward a more flexible exchange rate regime, and that the U.S. supports such a shift.

The remarks led to the discount on one-year dollar-yuan non- deliverable forward contracts widening to a record 1950-1750 to the spot rate earlier on Tuesday, and also pushed most regional units higher in the spot market, a U.S. bank trader said.

The discount narrowed to 1350-1250 after Chinese authorities dismissed the talk, but widened again later in the session.

UBS Warburg said it's only a matter of time before China moves to a more flexible exchange rate regime.

The bank expects the trading band to widen over the next 12 months, and the likely immediate reaction would be a modest appreciation in Asian currencies, particularly the Taiwanese, Korean, Thai and Singapore units.

The South Korean won pushed higher on demand from foreign investors buying local shares, despite government jawboning and suspected central bank intervention, traders said.

The dollar finished at 1,184.0 won, down from 1,190.3 won on Monday, and at its lowest close since Feb. 7. The government was suspected to have bought dollars via state-run banks to slow the U.S. currency's fall against the won, traders said.

Yonhap Infomax on Tuesday quoted Choi Joong-Kyung, director- general of the Ministry of Finance and Economy's international finance bureau, as saying there was some speculation behind the dollar's fall, and warned the government is prepared to take "strong" action at any time.

Meanwhile, the U.S. unit ended at NT$34.522, down from NT$34.599 on Monday. This was the dollar's lowest close since Jan. 20.

The Indonesian rupiah was underpinned by continued capital inflows. Dealers said offshore investors were selling dollars for rupiah to fund investments in high-yielding local assets, especially bonds.

But the U.S. unit was supported by demand from importers and local companies that need to service offshore debt.

The dollar closed the local session at Rp 8,195, down from Rp 8,205 on Monday.

The Singapore dollar rose in thin trading with market players largely ignoring the release of key local export data and focusing instead on external factors, dealers said.

Late in the local session, the dollar was quoted at S$1.7268, down from S$1.7294 late on Monday.

Speculation of continued intervention by Japanese monetary authorities to support the U.S. dollar against the yen led to concerns the Monetary Authority of Singapore might do the same for the local unit.

Singapore's non-oil domestic exports rose 8% in May from a year ago, compared with a 4.4 percent rise in April, below the average 9.4 percent forecast in a Dow Jones Newswires poll.

Market players said the numbers served to underpin the view that Singapore's gross domestic product is likely to contract in the current quarter.