Regional currencies have mixed fortunes in trading
Regional currencies have mixed fortunes in trading
SINGAPORE (Dow Jones): Southeast Asian currencies turned in a mixed performance against the U.S. dollar during Asian trading yesterday, with the Singapore dollar and ringgit both dropping, while the baht and the rupiah floated higher.
Meanwhile in North Asia, the downward pressure on the yuan and the Hong Kong dollar eased somewhat. The forward premium on the U.S. dollar dropped back slightly against both currencies after the Hong Kong government was detected intervening to support the stock market for the second time in a week.
The Philippine peso also strengthened, while the easing of speculative pressure on China and Hong Kong, coupled with a run- up in the yen, bolstered both the South Korean won and the new Taiwan dollar.
Once again the Singapore dollar showed itself the most immediately vulnerable of the regional currencies, sinking against the U.S. currency during the afternoon on sales from London-based market participants, according to traders.
Having outperformed every freely-floating currency in Asia since the start of the region's economic crisis, the Singapore dollar is now regarded as over-valued by many traders and analysts.
Reports issued Monday by J.P. Morgan and Merrill Lynch respectively predicting 11.5 percent and 1.7 percent falls by the end of the year, only added to the market's bearishness towards the island republic's currency, as the U.S. dollar rose to end Asian trading on Tuesday at S$1.7689, up from S$1.7608 late Monday.
With flush liquidity in the Singapore money market keeping Singapore dollar interest rates consistently below equivalent U.S. dollar rates, few market players hesitate to forecast further falls in the local currency.
Late on Tuesday the three-month Singapore dollar interbank rate was offered at 5.00 percent, significantly below the equivalent U.S. dollar Singapore interbank offer rate of 5.6875 percent.
The weakness of the Singapore dollar contrasts starkly with the relative stability of the ringgit, sustained despite the market's deep-rooted pessimism on the Malaysian economy and currency.
Although the ringgit dropped on Tuesday, with the U.S. dollar rising to 4.2350 ringgit from 4.2272 ringgit late on Monday, high offshore interest rates and a ballooning current account surplus are helping to support the Malaysian currency, say analysts.
"In the first quarter of the year the (Malaysian) current account surplus was 9 percent of GDP. In the second quarter it will be closer to 15 percent," predicted Prasenjit Basu, regional economist at CS First Boston in Singapore.
Although Basu acknowledges that sentiment towards the ringgit remains precarious, he argues that the huge imbalance in fund flows created by collapsing Malaysian imports is capping the dollar around current levels.
Although not as bold in their forecasts as Basu, other analysts agree with this view.
On the Philippine Dealing System, the peso rose in line with the general Asian trend. At the close of trading, the U.S. dollar was quoted at 42.85 pesos, down significantly from Monday's closing level of 43.25 pesos.
In the spot market, the Hong Kong dollar edged higher in response to the authorities' action to support the stock market, with the U.S. dollar dropping to HK$7.7490 from HK$7.7498. In the forward market the Hong Kong dollar interest rates implied by HK$/US$ forward premiums eased, with the implied three-month rate dropping to 12.30 percent, from 12.92 percent the day before.
Although the U.S. dollar inched one point higher against the yuan in the spot market, ending trading at 8.2799 yuan (CNY) compared with CNY8.2798 on Monday, sales of the Chinese currency in the offshore non-deliverable forward market eased somewhat.
Late in Asia the yuan interest rate implied by the three-month US$/CNY NDF rate stood at 18.73 percent, down from 19.22 percent the previous day.
Against the South Korean won, the U.S. currency ended at 1,319 won, down from Monday's close of 1,333 won.
Against the Taiwanese currency, the U.S. dollar ended the session lower at NT$34.734, compared with Monday's close of NT$34.761.