SE Asia currencies follow yen lower
SE Asia currencies follow yen lower
SINGAPORE (Dow Jones): Southeast Asian currencies closed sharply lower yesterday in a volatile day of trading in Asia.
Against the backdrop of the weak Japanese yen, which has pressured regional currencies for the past several weeks, exchange rates were hit by bad news from several quarters throughout the day.
Equity markets were pummeled across Asia. The Hang Seng Index in Hong Kong sank nearly 5 percent to 7979.37 points, a level it hasn't seen since February 1995. Singapore's Straits Times Index fell 4.4 percent to 1067.81 point, a eight-and-a-half year low.
In addition, a research report from Morgan Stanley predicted that Southeast Asian currencies would sink lower against the U.S. dollar by year-end.
Morgan Stanley economist Tim Condon forecast by year-end the U.S. dollar would rise to 15,000 rupiah, 5.000 ringgit, 50 baht and S$2.
A trader at a U.S. bank in Singapore said the Morgan Stanley report did generate a lot of talk, but added that it contained no revelations.
"If you've been in the know, you should already be long dollars," he said. "This is just adding fuel to the fire."
The Singapore dollar market greeted the day to headlines that international ratings agency Fitch IBCA believes that bank deregulation and greater disclosure could harm the credit standing of Singapore banks.
Intraday, the U.S. dollar rose to a four-month high of S$1.7303 before retracing. At 1050 GMT, the U.S. dollar was quoted at S$1.7285, much higher than S$1.7075 late in Asia Tuesday.
"The market was looking to push S$1.72 anyway, and the Fitch report gave the excuse," said a trader at a British bank in Singapore.
The Indonesian rupiah, dragged out of the near-total illiquidity it has maintained since late May by the sell-off in other regional currencies, sank more than 10 percent to a four- month low. At 1100 GMT, the U.S. dollar was quoted at Rp 13,150, up from Rp 11,812.50 late Tuesday in Asia.
"General weakness in the region is moving the rupiah," said one trader at a U.S. bank in Singapore. "There are still people in Jakarta who need to buy dollars."
Andrew Dermot Fung, a treasury economist with Standard Chartered Bank in Singapore, said most of the dollar-buying was done in Jakarta by Indonesians.
"Very few people offshore are prepared to take the counterparty risk," Fung said.
The U.S. dollar traded in a wide range against the Malaysian ringgit throughout the day, as low as 3.935 ringgit and as high as 4.030 ringgit.
"Even on days where you don't see big moves in dollar/yen, the ringgit still trades in fairly big ranges," Fung said. "Today is another day like that. There were pretty small volumes in the interbank market."