SE Asian currencies down, skepticism marks trading
SE Asian currencies down, skepticism marks trading
SINGAPORE (Dow Jones): Southeast Asian currencies are mostly lower against the U.S. dollar in late dealings yesterday amid extremely volatile, jittery trading, said market players.
Looking ahead, regional currencies are expected to undergo very choppy dealings next week on continued uncertainty in U.S. stocks, the political fortunes of Russian president Boris Yeltsin and other factors, said market players.
The view taken by market players on the dollar versus the yen will largely determine the outlook of Southeast Asian currencies, said traders. There are still no clear signs whether the dollar will break below Y140.00 on the downside or above Y145.00 on the upside, they added.
"Friday's dealings were very choppy...there was a lot of uncertainty," said the chief regional dealer at a major U.S. bank. "People are not sure how to interpret all the developments around".
"We're really not sure where the dollar-yen (dollar versus the yen) is headed. This morning, we thought the dollar's (upward) trend against the yen was reversed. Now, we have seen a strong rally in the dollar-yen," said the treasury head of a major Southeast Asian bank.
The dollar fell to an intraday low of Y140.35 in early Friday dealings before staging a rebound to a high of Y144.20-30. Most Asian currencies tracked the movement in the yen in the initial trading.
The U.S. dollar buying against the Singapore dollar was largely triggered by the entry of European market players, said traders.
The U.S. dollar's break above S$1.7780 triggered some stop- loss orders, forcing interbank players to cover their short positions, said Derrick Lee at MCM Asia-Pacific. While some good interim support can be found around S$1.7700-50, the short term target for the U.S. dollar is still seen at S$1.80, traders said.
Resignation of the top two officials at Bank Negara, the central bank in Malaysia, affected trading. Earlier Friday, Dow Jones Newswires reported that the central bank governor, Tan Sri Ahmad Mohamed Don, and his deputy, Fong Weng Phak, tendered their resignations. There was a very strong upside bias in the dollar versus the ringgit in the short term, added traders.
"People are looking to buy dollar-ringgit (dollar versus the ringgit). There's a mood that things are going to get a lot worse in the country," said a regional currencies trader at a Thai bank.
"The general feeling is that the market is keen on buying the dollar-ringgit to 4.2700-3000 ringgit," added the trader.
Similarly, the Philippine peso closed lower against the dollar Friday on demand for the U.S. currency following the yen's renewed weakness, traders said.
"The yen's fall caused some panic in the peso-dollar market," a trader with a local bank said. Traders expect the peso to continue to depreciate next week, possibly falling below 45 pesos (PHP) to the dollar on Monday.
At the close, the dollar averaged 43.874 pesos on the Philippine Dealing System, up from Thursday's average of 43.582 pesos.
In the onshore market for the Thai baht, the local currency ended lower in Asian spot trading Friday in a volatile market, as foreign investors sold most Asian currencies to take long positions on the dollar.
The Thai currency was also weaker in the swap market, where investors make agreements to buy and sell baht at fixed prices at fixed times in the future. Swap premiums were higher amid dollar buying.
The only Southeast Asian currency which bucked the trend Friday was the Indonesian currency, which traded to a high of 10,900 rupiah to the dollar.
"Although the rupiah managed to break 11,000, the level remained a strong support for the dollar," said Pardi Kendy, the head of the treasury department of Bank Buana Indonesia.
However, traders see the rupiah testing the level again next week, and expect the rupiah to trade below IDR11,000 after breaking it.
Meanwhile, in North Asia, the Hong Kong dollar was a touch stronger than earlier but forward foreign exchange premiums surged late in late Asian trading Friday as investors rushed to hedge local currency exposure.
The Hong Kong dollar, while weaker at HK$7.7490 to the U.S. dollar than late Thursday's level of HK$7.7460, has strengthened from HK$7.7499 to the dollar during most of Friday afternoon.
Tight money markets forced investors to turn to the spot market to cover their short positions. Activity was centered in the forwards market, added traders.