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.