Nearly all Asian currencies down against U.S. dollar

Nearly all Asian currencies down against U.S. dollar

TOKYO (Dow Jones): Nearly all Asian currencies fell against the dollar in Asia late Friday, hurt by Standard & Poor's downgrade of Japan's sovereign credit ratings.

Only the Philippine peso bucked the overall trend of Asian currencies' weakness against the U.S. dollar in late Asian trading.

In New York late Thursday, S&P cut its long-term local and foreign currency sovereign credit ratings on Japan to AA+ from AA.

"To the degree that this news puts pressure on Japanese politicians' reform efforts ahead of summer elections, there will be heightened discord between government officials and the Bank of Japan," said Rebecca Patterson, currency strategist at J.P. Morgan in Singapore. "This could put (downward) pressure on the yen. I'm forecasting the dollar at Y120 by March-end."

Turkey's overnight decision to float the lira also weighed on market sentiment. "Southeast Asian markets are relatively open economies, so they're quite vulnerable to quick shifts in capital flows. The Turkey news could remind investors of the risks of the Asian markets, (leading to capital outflows)," Patterson said.

The Indonesian rupiah extended its recent fall late Friday on strong corporate dollar demand and concerns that violent ethnic clashes in Kalimantan could deal another blow to already faltering foreign investment inflows, dealers said.

Around 0915 GMT (4:15 a.m. EST), the dollar was at Rp 9,685 rupiah, up from Rp 9,630 late Thursday.

Local state banks failed to defend the rupiah, dealers said. State banks had sold dollars around Rp 9,660 in the morning and around Rp 9,665 in the afternoon, they said.

The size of the selling, estimated to be around $10 million to $20 million, wasn't big enough to counter the dollar's ascent, dealers said.

"The selling was well absorbed by the market," said a dealer at a European bank, adding that he expected more weakness in the rupiah.

"The rupiah will remain under pressure next week," said the dealer, adding it likely weaken to Rp 9,725.

"The market is not too long in dollars and some people still have short dollar positions to cover," the dealer said.

Expectations of continued state bank dollar-selling and profit-taking by commercial banks will, however, likely slow the rupiah's fall, dealers said.

Since its debut Monday, offshore trading in rupiah non- deliverable forwards has remained subdued. Dealers said there were no reported trades Friday in the direct interbank market, although indications for the rupiah were lower, in line with losses in the spot market.

"It has turned out to be a flop in the first week," said a dealer at a U.S. bank in Singapore. "Nobody's taking any interest, nobody's asking about it."

Bids/offers for the one-month tenor were indicated at Rp 9,770/Rp 9,815, and Rp 10,220/Rp 10,320 for the six-month NDFs.

In Taipei, the New Taiwan dollar was slightly lower against the U.S. dollar as market players took profit on long U.S. dollar positions. Dealers attributed this to the yen's weakness, the stock market's dismal performance, continued net selling by foreign investors and poor unemployment data issued during the session.

Late in Asia, the U.S. dollar was at NT$32.38, up from NT$32.355 Thursday.

In Seoul, the South Korean won also lost ground following the yen's fall against the U.S. dollar. Recent reports that credit rating agencies were unlikely to upgrade South Korea's sovereign rating soon continued to throw a cloud over the won.

Late in Asia, the dollar was at 1,249.2 won, up from KRW1,244.3 Thursday.