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.