SE Asia currencies up as U.S. stocks fall
SE Asia currencies up as U.S. stocks fall
SINGAPORE (Bloomberg): The Singapore dollar and other
Southeast Asian currencies rose yesterday as the plunge in U.S.
stocks raised concern investors will sell U.S. securities and
convert the dollar proceeds into other currencies.
The Singapore dollar strengthened 0.2 percent to 1.7227 to the
U.S. dollar. The Malaysian ringgit rose 0.4 percent to 4.1300 to
the dollar. The Indonesian rupiah rose 1.8 percent to 12,725. The
Philippine peso was little changed at 42.175 to the dollar from
42.155 late Tuesday. The Thai baht fell 0.1 percent to 40.82 to
the dollar.
"The dollar (fell) after the decline in U.S. stocks, making
the yen and other currencies look stronger," said Chia Woon
Khien, head of Asian research at Skandinaviska Enskilda Banken in
Singapore.
In the U.S. Tuesday, the Dow Jones Industrial Average fell 3.4
percent, its worst decline since the Oct. 27 tumble.
The strength in the yen against the dollar also helped the
region's currencies. The dollar was recently at 144.04 yen.
The performance of Southeast Asian currencies is closely tied
to the yen, as countries such as Malaysia and Thailand look to
increasing exports to Japan, Asia's biggest economy, to pull
themselves out of an economic slump.
Japan is in its worst recession in 50 years, raising concern
the world's second-biggest economy will not be able to increase
its imports of Asian goods, which range from textiles to
televisions.
Yen, yuan
Investors are cautious about selling the yen for the dollar
while awaiting new steps Japan's new leaders are expected to
announce in the coming weeks to pull the economy out of a slump.
"Investors are going to give Japan some time before they raise
their expectations for reforms," said Terence Ngooi, manager for
strategic trading at Sanwa Bank in Singapore.
Prime Minister Keizo Obuchi took over the leadership from
Ryutaro Hashimoto last week.
"There wasn't any major change to Japan's economic outlook,"
Chia said, adding that if investors perceive that the country is
still dragging its feet on cleaning up the banking industry and
imposing other reforms, the dollar could rise against the yen.
The gain in Southeast Asian currencies could also be limited
as the yen's decline fueled speculation China may devalue its
yuan to make its exports cheaper.
Factories in China which assemble electronic parts are seeing
their export competitiveness eroded because of the decline in
Southeast Asian currencies. In yen terms, Chinese exports have
also become more expensive following the yen's 17 percent decline
against the dollar in the past 12 months.
A devaluation of the yuan could weigh on the Thai baht,
Malaysian ringgit, the Indonesian rupiah and the Philippine peso,
by making Southeast Asian exports less attractive. These
countries are trying to increase exports and boost government
revenue.
Thailand and Indonesia are in their first recession in three
decades, following a surge in interest rates when investors
pulled out amid the currency turmoil. Malaysia's teetering on the
brink of a recession while Singapore said its neighbors' woes
will crimp its growth.
U.S. Deputy Treasury Secretary Lawrence Summers warned on
Tuesday Asia has a "long way to go" before its economic problems
can be resolved.