SE Asian currencies continue upward climb
SE Asian currencies continue upward climb
SINGAPORE (Dow Jones): The U.S. dollar's downward spiral against the yen and Southeast Asian currencies continued Friday, as investor optimism about the well-being of American and Latin American economies fades.
Global markets are now awaiting fresh statements and measures to come out of this week's Group of Seven leading industrial nations finance ministers tete a tete in London.
"If the G-7 gets its act together sometime over the weekend and issues some sort of announcement, then Latin America and Asia will be the beneficiaries - not the U.S.," said one regional strategist at a U.S. bank in Singapore. "And after such lows in the regional currencies, any recovery could be quick and pronounced in emerging markets."
What has slowly become an "enormous overhang in the U.S. current account deficit," as one economist at a U.K. bank said, means that the U.S. dollar is about to "tank, especially as pressure mounts to cut interest rates further. That should have a fairly large knock-on effect for the value of Asian currencies."
A few weeks ago, when capital flows started heading across the Pacific Ocean to push up the baht, rupiah and peso, Asia's central bank and government officials nervously voiced concerns about export competitiveness.
That mood has changed.
Bank of Thailand Governor Chatu Mongol Sonakul said this week the baht's new-found strength has reduced the country's foreign debt servicing commitments, which currently stand at US$87 billion. Much the same can be said for Indonesia and Philippines.
At 10:15 GMT, the U.S. dollar is trading at 36.70 baht, down from 36.8050 Thursday and 37.60 last Friday.
Traders expect the U.S. dollar to trade just below 37 baht in the next few sessions, although there is some concern that the Bank of Thailand will take some action to prop up the dollar.
It has been the Philippine peso's turn to take center stage this week in Asian currency markets. The U.S. dollar is trading at 40.330 peso, down from 40.79 Thursday and well down from 42.05 last week. Traders and economists expect the dollar to fall below 40 and are somewhat surprised it hasn't happened yet.
The Philippines just hasn't had the same gearing or foreign debt problems that its geographical neighbors have," said Kate O'Donoghue, a regional economist at Barclays Bank in Singapore.
The region's bullish reversal - even if it is, as many market skeptics believe, a short-term fool's market - has favored the one country that analysts and economists are calling the A- student in Asia: Singapore.
Instead of pushing the Singapore dollar way down to be in line with the 40 percent and 50 percent falls in the currencies of its competitive neighbors, the Singapore government has focused on the cost of doing business," said one strategist at a U.S. bank. "That has left room for the Monetary Authority of Singapore to operate."
At 10:30 GMT, the U.S. dollar is trading at S$1.6255, up from S$1.6175 in late trading Thursday but almost unchanged from S$1.6275 last Friday.
The U.S. dollar has quietened dramatically in trading against Indonesia's rupiah this week, dealers said, as Bank Indonesia statements and a lack of new developments have kept the U.S. dollar well within a 7,000 to 8,000 range. At 10:30 GMT, the U.S. dollar is trading at 7,550, almost unchanged from 7,530 Thursday and a touch below 7,887 last Friday.
In North Asia, the U.S. dollar is trading at NT$32.420, down from NT$32.525 Thursday and NT$32.898 last Friday. The dollar has been largely flat against the South Korean won this week. The U.S. currency was trading at 1,318 won, up slightly from 1,314 Thursday and 1,316 last week.