Most regional currencies higher

Most regional currencies higher

SINGAPORE (Dow Jones): Asian currency bears were forced to retreat yesterday, as a steep rise in the yen combined with sharp stock market rallies across the region to push Southeast Asian currencies higher against the U.S. dollar.

Japanese threats of central bank intervention to support the yen, and actual intervention by the Hong Kong government to shore up the Hang Seng stock index, spurred market participants to unwind outstanding long U.S. dollar positions, boosting currencies throughout the region.

The Japanese yen held firm against the dollar in late trading after rallying on market fears of central bank intervention, dealers said.

In late trade, the yen traded at 144.15-18 against the U.S. dollar, compared with 145.13 mid-morning here and 145.88 yen in New York late Tuesday.

Among the best performers was the rupiah, which rose to its highest level in over two months as the U.S. dollar dropped below the psychologically important 12,000 rupiah level for the first time since early June.

"Now that Indonesia is rescheduling its foreign debt, dollar liquidity should be easier, so the state banks are unloading their long U.S. dollar positions," explained a trader at a joint venture bank in Jakarta.

The baht also ended substantially higher against the U.S. currency yesterday, despite being sold off its intraday high in late Asian trading.

Offshore market participants, said traders, were caught long by the Bank of Thailand's assertion late Tuesday that it plans to close its $11.3 billion-worth of outstanding foreign exchange swaps, without rolling the contracts over.

Anticipating a squeeze in baht liquidity, U.S. funds rushed to liquidate their short baht/long U.S. dollar positions, pushing the U.S. currency down against the baht in the spot market.

Late in Asian trading hours the U.S. dollar was quoted at 41.5650 baht, down from 41.69 baht the previous day.

Among other regional currencies, the ringgit and the Singapore dollar also rose, lifted primarily by Japanese officials' warnings that intervention to support the yen may be imminent.

"I don't think anyone really believes that intervention can stop the dollar's up-trend, but at the same time traders are very short term in outlook. No-one wants to be the one who buys dollars five minutes before the Bank of Japan intervenes," said Marshall Gittler, chief currency strategist at Bank of America in Hong Kong.

Against the ringgit the U.S. dollar ended Asian trading at 4.2050 ringgit, down from 4.2350 ringgit the day before. The U.S. dollar is likely to find support at around 2.1800 ringgit to 2.2000 ringgit, with bids emerging at those levels, say traders.

Against the Singapore dollar, the U.S. currency dropped to S$1.7565 late in Asian trading, down from S$1.7689 late on Tuesday.

Although the local currency has depreciated by about 20 percent against the U.S. dollar since the start of the Asian crisis last July, over the same period it has risen against every freely-floating currency in Asia, raising worries that an overly strong Singapore dollar is rendering exports uncompetitive.

In the spot market the U.S. dollar also slipped against the Hong Kong dollar, ending Asian hours at HK$7.7465, down from HK$7.7490 late the previous day. This was after the Hong Kong authorities again intervened in the stock market, buying equities in an attempt to flush out speculators running short positions in the benchmark Hang Seng stock index.

The government's action also helped to push down Hong Kong dollar interest rates, as market participants bailed out of short Hong Kong dollar positions in the forward market.

Late in Asia the three-month US$/HK$ forward was trading at an implied Hong Kong dollar interest rate of 11.37 percent, down from 12.30 percent the day before.

Although the Chinese yuan ended trading in the official spot market unmoved on the day, with the U.S. dollar flat at 8.2799 yuan (CNY), downward pressure on the yuan in the offshore non- deliverable forward market also eased.

In North Asian markets, both the Korean won and the New Taiwan dollar rose from Tuesday's levels. The U.S. dollar closed at 1,305 won, down from 1,319 won. The U.S. dollar also ended at 34.699 New Taiwan dollars, down from NT$34.734 in response to the yen's rise and sales of the U.S. currency by the Taiwanese central bank.

The Philippine peso, however, failed to benefit from the regional rebound, with the U.S. dollar ending domestic trading at 42.920 pesos, up from 42.850 pesos at the previous close.