SE Asian currencies down, volatility bypasses forex
SE Asian currencies down, volatility bypasses forex
SINGAPORE (Dow Jones): Most Southeast Asian currencies finished Asian trading yesterday down against the U.S. dollar, despite being hauled up off their intraday lows by a late surge in the yen.
With market attention focused on unfolding events in Japan, China and Russia, the rollercoaster volatility, which rocked major currencies and hammered Asian stock markets, for the most part bypassed regional currencies. Attempting to ride out the storm by maintaining existing "safe haven" long positions in the U.S. dollar, market participants proved reluctant either to buy or sell regional currencies in large volume.
"You certainly shouldn't be short on dollars right now," said one regional currency trader at a French bank in Singapore.
Despite that assertion, nervousness among market participants ran high, as traders and analysts tried to divine the future course of regional markets. Weighed against the belief that the U.S. dollar will soar on any move to devalue by either China or Russia, was the fear that intervention by the Bank of Japan to support the yen or a sell-off in the U.S. stock market could send the U.S. currency plummeting.
"People are looking at Russia and China and thinking that if things blow up over there, it will have an impact over here," said the French bank trader.
Whether the U.S. dollar can push higher against Southeast Asian currencies depends largely on how much pressure the market brings to bear on the Chinese yuan and the Hong Kong dollar's fixed link to the U.S. dollar.
Many traders and analysts, principally those based outside Hong Kong and China, believe that the Hong Kong dollar's link is doomed and that it is only a matter of time before China and Hong Kong succumb to market forces.
Late in Asian trading on Thursday, pressure on both the Hong Kong dollar and the yuan remained high.
Against the Hong Kong dollar, the U.S. dollar was quoted at HK$7.7498, up a touch from HK$7.7485 the previous day, despite sales of the U.S. currency by the Hong Kong Monetary Authority.
Against the yuan, the U.S. currency was at 8.2798 yuan, barely different from 8.2799 yuan the previous day.
Bigger moves were seen in the forward markets, where buying of U.S. dollars against the Hong Kong dollar pushed Hong Kong Dollar interest rates higher.
The pressure against the Hong Kong dollar was reflected in Southeast Asian markets, although profit-taking from long U.S. dollar positions against the yen boosted the region's currencies in late trading.
In Singapore a speech by Deputy Prime Minister Lee Hsien Loong outlining moves to relax some capital account restrictions on the Singapore dollar was greeted by traders as negative for the local currency. " The speech reinforced the market's impression that the government will not be too concerned by a gradual depreciation of the Singapore dollar," said one U.S. bank trader.
Attempts to push the U.S. dollar higher against the Singapore dollar were frustrated by offers from local banks at around S$1.7600, according to traders. Late in Asian trading the U.S. dollar had eased from earlier highs to trade at S$1.7520, up from S$1.7454 the day before.
Against the ringgit the U.S. dollar ended at 4.1950 ringgit, flat compared to its level late Wednesday.
Against the baht, the U.S. currency rose to 41.9000 baht from 41.8350 baht, while against the Indonesian currency it edged up to 12,925 rupiah, from 12,850 baht.
On the Philippine Dealing System the U.S. dollar finished trading at 43.210 pesos, up from 43.150 pesos at Wednesday's close.
In North Asia the U.S. currency ended up against the South Korean won, finishing at 1,332.50 won, slightly above 1,331 won the day before.
Against the new Taiwan dollar the U.S. currency fell back, however, after the Taiwanese central bank stepped into the market, selling an estimated $100 million in defense of the local currency. At the close of domestic trading the U.S. dollar was trading at NT$34.771, down from NT$34.794 the previous day.