Rupiah falls as Singapore dollar gains
Rupiah falls as Singapore dollar gains
SINGAPORE (Dow Jones): The Indonesian rupiah slipped back on
Thursday even as the Singapore dollar regained some of the ground
it recently lost against the U.S. dollar.
But for the most part trading in Southeast Asian foreign
exchange markets was thin and desultory during local hours on
Thursday.
In North Asia the won was forced sharply lower from the open
by an early spurt of dollar-buying, which was widely attributed
to intervention by the Bank of Korea.
In later trading, however, the Korean currency's natural
buoyancy re-asserted itself, as the won partially recovered from
its early low.
In Jakarta, as local dealers returned to their desks Thursday
morning following a two-day holiday, a flurry of U.S. dollar
purchases pushed the rupiah down steeply from the open, with the
U.S. currency rising to an intraday high of around Rp 8,700.
Domestic players, said traders, were buying dollars in
anticipation of heightened social and political tensions
following the end of Ramadhan earlier in the week.
Although the U.S. currency was capped by offers from offshore
players looking to book profits from the dollar's recent climb,
the U.S. currency should still head higher in the short term,
according to most traders.
"The situation in Indonesia can only get worse," declared the
head of regional foreign exchange at one U.S. bank in Singapore.
"The dollar is definitely going higher. We will see Rp 8,850 in
the next few days."
As Asian interbank trading drew to a close on Thursday, the
U.S. currency was quoted at Rp 8,645, up from Rp 8,470 late in
Singapore on Wednesday.
Other dealers, however, were reluctant to attach much
significance to the rupiah's tumble.
"You must understand that liquidity is very bad, and that it
really doesn't take much to move the market," said the Singapore-
based regional head of foreign exchange at one major European
bank.
For example, the U.S. dollar's sudden advance to Rp 8,550 from
8,450 early Thursday was driven by the execution of an order
worth a mere $500,000, he said.
Even as the rupiah slipped against the dollar, sales of the
U.S. currency against the Singapore dollar pushing the Singapore
currency higher.
Late in the Asian day, the U.S. dollar had dropped to
S$1.6755, down from S$1.6800 late on Wednesday.
One trader at a Singapore bank attributed the U.S. dollar
offers to pre-weekend position squaring by market players who had
previously gone long the U.S. currency anticipating that the
yield differential between the Singapore dollar and the U.S.
dollar would push the local currency lower.
With overnight interbank rates on the Singapore dollar
currently below 0.5 percent, in contrast to rates of around 4.50
percent on the U.S. currency, for weeks traders have been
predicting that the Singapore dollar would weaken, with the U.S.
dollar strengthening to levels around S$1.70.
But the expected slide in the Singapore dollar has failed to
take place and the Singapore dollar carry trade appears to be
losing its luster.
"Some of the weaker players are getting out. They have
realized that the profit potential is not that great," said the
U.S. bank trading chief.
According to Wong Keng Siong, regional economist at Dai-Ichi
Kangyo Bank in Singapore, foreign exchange traders were wrong to
assume that ultra-low interest rates necessarily meant a weaker
Singapore dollar.
Singapore's low interest rates are the result of hefty
liquidity injections by the Monetary Authority of Singapore, he
explained.
"The MAS is simply injecting liquidity to match the inflows of
offshore fund," he explained.
Elsewhere in Southeast Asia, activity was generally quiet
Thursday.
Against the Thai baht, the U.S. dollar eased slightly, ending
Asian interbank trading at 36.4350 baht, compared with 36.5100
the previous day.
The U.S. dollar also lost ground to the Philippine peso,
ending the domestic session at 38.255 pesos, down from 38.370 at
Wednesday's close.
In North Asian markets, the South Korean won started the day
in dramatic fashion, falling sharply as the U.S. dollar soared to
an intraday high of 1,179.50 won within minutes of the open,
rising from 1,165.50 at the previous day's close.
Traders reported heavy dollar-buying interest from local
banks, hinting that the Bank of Korea was behind the move.
By the end of domestic trading, however, the U.S. dollar had
given back some of its early gains, to end the day at 1,172.30
won.
Meanwhile the new Taiwan dollar ended all but flat against the
U.S. dollar, which at the end of local trading in Taipei was
quoted at NT$32.261, compared with NT$32.263 at Wednesday's
close.