Regional currencies end mixed against dollar in rough trading

Regional currencies end mixed against dollar in rough trading

SINGAPORE (Dow Jones): Asian currencies are mixed against the U.S. dollar in choppy trading late Thursday as currency markets take a breather after a number of volatile sessions earlier in the week, traders said.

Regional currencies moved largely sideways during the session, even as the U.S. dollar moved quietly higher against the yen, the residual effect of a strong showing on Wall Street overnight. The Dow Jones Industrial Average closed up 188 points at 10588 points.

At 0800 GMT (4:00 a.m. EDT), the U.S. dollar was trading at Y107.85, up from Y107.13 in late Asian trading Wednesday.

While the Korean won and Indonesian rupiah managed to move higher against the U.S. dollar, the Singapore dollar, Philippine peso, and Thai baht faded during the session. The New Taiwan dollar ended the session flat.

Traders said regional currencies were moving on domestic news for the moment, but cautioned that Japan's decision Friday on the size of its supplementary budget could roil markets. Forecasts are anywhere from Y10 trillion to more than Y13 trillion. Economists said the higher the figure, the more Japan's domestic fixed income markets would come under pressure.

Japanese monetary and fiscal policy decisions aside, regional currencies have by and large been mirroring movement in the Thai baht in recent sessions, especially after the Bank of Thailand Tuesday reinterpreted an existing rule on lending baht to nonresident parties.

At 0800 GMT, the U.S. dollar was trading at 39.395 baht, up from 39.085 baht in late Asian trading, but well down from 41.24 baht Sept. 29.

Traders and currency strategists are now saying that October is shaping up to be a giant game of chance, given the Oct. 20 presidential elections in Indonesia.

They said the focus will start to shift away from the baht and toward the uncertain fortunes awaiting the Indonesian rupiah. As one currency strategists said, "Rupiah strength is impossible to predict in the short-term because it is based on politics not economic data."

That political arena is becoming increasingly murky, following the announcement that National Awakening Party's Abdurrahman "Gus Dur" Wahid would campaign for the presidency.

Nevertheless, Simon Flint, global currency strategist at Bank of America in Hong Kong, predicts that Megawati Soekarnoputri will ultimately prevail, but only if she manages to convince Gen. Wiranto to accept the vice-presidency.

"We expect that the rupiah will breach Rp 7,000 on news of Megawati's victory. A reasonable target would be Rp 6,700 in the thin market conditions," Flint said.

He said nervous investors can reduce the high risk of a rupiah trade by taking on proxy positions, especially in the baht and Philippine peso. The baht represents the closest proxy, with a 0.92 correlation coefficient, he said. If the U.S. dollar did fall to Rp 6,700, the baht would likely hit 38.72 baht against the U.S. dollar.

At 0800 GMT, the U.S. dollar was quoted at Rp 7,735, down slightly from Rp 7,740 late Wednesday.

On the Philippine Dealing System, the U.S. dollar was trading at 40.325 pesos, up from 39.99 pesos in late trading Wednesday.

The U.S. dollar was also trading at S$1.6788, up from S$1.6764 late Wednesday.

Bank of America's Flint said the Singapore dollar would likely climb to S$1.665 against the U.S. dollar if a Megawati election victory pushed the U.S. dollar down to Rp 6,700.

In other markets, the U.S. dollar was trading at 1,201 won, down from 1.203.7 won in late trading Wednesday. South Korea's stock market index climbed once again during the session, closing 1.8 percent higher at 851.15 points - an 8 percent rise over the intraweek low of 788.73 points.

South Korea's gross domestic product is expected to grow 11 percent in the third quarter and 9.3 percent in the fourth quarter, according to Bank of Korea Governor Chon Chol-hwan. GDP growth for the year is expected to be 8.8 percent, a sharp rise from a 5.8 percent contraction in 1998.

Against the New Taiwan dollar, the U.S. dollar was trading at NT$31.78, flat from late Wednesday.