Most Asian monies up, rupiah down

Most Asian monies up, rupiah down

Alan Yonan Jr., Dow Jones, Singapore

Most Asian currencies strengthened against the dollar Tuesday, led by the Thai baht's ascent to a 16-month high.

The South Korean won firmed for the first time in four sessions, prompting renewed concerns from government authorities about the currency's strength.

The Singapore dollar, New Taiwan dollar and Philippine peso also strengthened, while the Indonesian rupiah weakened.

Unlike their counterparts in Seoul, Thai monetary officials said they weren't worried about the baht's recent appreciation. Late in Asian trading the dollar was quoted at 42.285 baht, down from 42.425 baht late Monday and its weakest finish since February 2001.

But Bank of Thailand Deputy Governor Pakorn Malakul Na Ayudhya told reporters the baht's level was not hurting the country's export competitiveness because other Asian currencies have been strengthening against the dollar as well.

He wouldn't say how much the baht has appreciated on a trade- weighted basis, but JP Morgan calculates that the currency has gained just under 2 percent since the start of the year.

Strong foreign demand for Thai stocks has helped fuel the baht's gains.

In Seoul, the Ministry of Finance and Economy issued a statement saying it was concerned over the market's "expectations for an excessive dollar fall" against the won.

"Some investors are selling (the U.S. dollar) to take advantage of such expectations," the Ministry said in the statement.

The dollar closed at 1,225.5 won, down from 1,230.5 won Monday.

South Korean monetary authorities are much more concerned than their other Asian counterparts about the impact of currency appreciation on their export competitiveness, said James Malcolm, foreign exchange strategist at JP Morgan in Singapore.

"Authorities over the last two weeks have become increasingly vocal in an attempt to stem the won's appreciation trend," he said.

The won has appreciated nearly 6 percent in trade-weighted terms since the start of the year. The New Taiwan dollar, by comparison, is virtually unchanged, Malcolm said.

There are signs that the Bank of Korea has intervened in the market too, buying modest amounts of dollars through domestic banks to smooth out volatility in the exchange rate, he said. But it is unlikely the central bank will intervene on a large scale like the Bank of Japan has, Malcolm added.

JP Morgan is predicting the won will continue to strengthen against the dollar in line with South Korea's economic recovery. The investment bank has set a year-end target of 1,180 won for the dollar.

Dollar demand from local companies pushed the U.S. currency higher against the Indonesian rupiah, but underlying sentiment remains rupiah bullish, dealers said.

The market's enthusiasm over Monday's London Club agreement to restructure US$1.3 billion in Indonesian debt carried over into Tuesday, pushing the dollar down to Rp 8,655 in early trading.

But dollar bids from some local companies, which dealers suspected were led by state-owned oil and gas company Pertamina, pulled the U.S. currency from its lows. Local companies usually buy dollars to pay maturing offshore debts and to finance imports.

Late in the session the dollar was quoted at Rp 8,765, up from Rp 8,740 late Monday.

The market's positive outlook toward the rupiah is also being fueled by expectations that the Indonesian Bank Restructuring Agency will sell an estimated Rp 150 trillion of bad loans this month. The sales are expected to induce local investors to bring cash from overseas to buy the loans at a discount.

The negative U.S. dollar environment prompted Taiwanese exporters to unload the currency against the New Taiwan dollar.

The U.S. dollar closed at NT$34.117, down from NT$34.164 Monday.

Many interbank traders who covered short U.S. dollar positions last week amid sluggishness in the yen cut their positions in the U.S. currency Tuesday as the yen held firm.

The Taiwan central bank bought the U.S. currency to slow the local dollar's rise Tuesday but wasn't very aggressive, dealers said.

The Philippine peso benefited from the bullish trend in Asian currencies, despite investor concerns about political uncertainty and the possibility of the government overshooting its budget deficit target for the year.

The Singapore dollar traded in a narrow range, finishing modestly stronger in line with its regional peers.

Near the end of Asian trading the U.S. dollar was quoted at S$1.7891, down from S$1.7935 late Monday.