SE Asian currencies down on dismal yen and yuan

SE Asian currencies down on dismal yen and yuan

SINGAPORE (Dow Jones): The market's bearish stance toward the Japanese yen and sustained speculative pressure on the Hong Kong dollar and Chinese yuan severely depressed sentiment toward Southeast Asia's currencies during Asian trading yesterday.

Across the region currencies ended the day lower against the U.S. dollar, with a 9 percent devaluation of the Vietnamese dong only serving to deepen the gloom. And with many market observers confidently predicting that the yen will drop further in the short term, more falls are forecast over the coming week.

"If the (U.S.) dollar breaks up through the Y146 to Y147 range, the market will be looking for a further 5 percent to 10 percent loss in the more liquid regional currencies," said Daniel Lian, the Singapore-based head of Asian markets research at ANZ Investment Bank.

Late in Asia yesterday the U.S. dollar was quoted at Y145.50, up from Y144.25 late the previous day in New York.

At the same time, heavy sales of Hong Kong dollars and yuan in the forward markets drove interest rates on those currencies sharply higher.

In Southeast Asian markets, the greatest pressure was exerted on the Singapore dollar, the most liquid of the regional currencies.

Towards the close of Singapore's interbank market trading, the U.S. dollar was quoted at S$1.7455, up steeply from S$1.7306 late the previous day.

Although the Singapore dollar is tipped to fall, observers are more hesitant to predict further depreciation for neighboring Malaysia's ringgit.

A combination of high offshore interest rates, currently in excess of 20 percent, ringgit buying attributed to large Malaysian corporations or Bank Negara's agents, and the liquidation of outstanding long U.S. dollar positions is placing a firm ceiling on the U.S. currency's appreciation against the ringgit, say traders.

Late yesterday the U.S. dollar was quoted at 4.1800 ringgit, up from 4.1725 ringgit late in Asia on Thursday.

Other regional currencies suffered more severely from the market's pessimism, however.

Against the Thai currency the U.S. dollar was pushed up to trade above the psychologically important 42.00 baht level for much of the day, before dipping to end Asian hours at 41.9550 baht, still up steeply from 41.1950 baht late the day before.

Meanwhile, on the Philippine Dealing system the peso dropped to its lowest level since mid-January, as the U.S. currency leaped to close at 43.49 pesos, up sharply from 42.70 pesos at Thursday's close.

The dong, too, fell victim to Asia's malaise yesterday, as the State Bank of Vietnam bowed to what many analysts believed to be inevitable and effectively devalued the currency by 6 percent by shifting its official target rate.

Late in Asia the U.S. dollar was being quoted in Hanoi at 13,800 dong, well above 12,997 dong late on Thursday. Trading was extremely illiquid yesterday, but when business resumes on Monday, the U.S. dollar is expected to waste little time adjusting to its new permitted trading band, moving rapidly to its allowed ceiling of 13,907 dong.

The new Taiwan dollar, too, fell, hitting a six-week low against the U.S. currency. At the close of domestic trading the U.S. dollar was quoted at NT$34.60, up from NT$34.50 at Thursday's close.

The won, however, bucked the regional trend, actually rising as local companies flush with U.S. dollars sold the U.S. currency to take advantage of its rise over recent sessions. At the end of Friday's trading, the U.S. dollar was at 1,326 won, down from 1,333 won at the previous close.