SE Asian currencies edge higher
SE Asian currencies edge higher
SINGAPORE (Dow Jones): Southeast Asian currencies edged a touch higher during Asian trading hours yesterday, in tandem with the yen and regional stock markets.
As lingering fears of central bank intervention lifted the Japanese currency against the U.S. dollar, participants in the regional foreign exchange markets pared back their long positions in the U.S. dollar in the run-up to the weekend.
But although analysts and traders say that trading over the coming week will be choppy, warning that the U.S. currency is highly vulnerable to a short-term correction, most maintain the view that the U.S. dollar remains a long-term buy against Asian currencies.
"What we could see is weak dollar longs squeezed out as short- term events drive people out of their positions," said Jonathan Hazell, Asian currency strategist at Barclays Capital in Singapore.
While either yen-supportive intervention by the bank of Japan or any further drops in the U.S. stock market are likely to trigger flurries of U.S. dollar selling in the regional foreign exchange markets, the boost to Southeast Asian currencies would be short-lived argue market observers.
"At the moment term regional markets are being driven by short-term speculative plays. People are buying and selling in ranges as fresh concerns emerge," says Thio Chin Loo, foreign exchange strategist at Banque Paribas in Singapore.
Overall the negative tone on Asian currencies is still clear, and that is unlikely to change unless Japan shakes off its policy paralysis and Asia's economies and stock markets stop bleeding," said Thio at Paribas.
Traders and analysts at other banks reflect this view, saying that whatever setbacks the U.S. dollar suffers in coming weeks, the longer term perspective is still clear.
Traders even remained chilly towards the baht, mustering little enthusiasm for the central banks long-awaited banking reform measures, announced yesterday.
Long priced into the market, the reforms, which included the central bank take-over of two commercial banks and five finance companies, had little immediate impact on the baht.
Late in Asian trading the U.S. currency was quoted at 41.80 baht, a little below 41.90 late the previous day.
Although greeting the clean-up as a step in the right direction, foreign exchange traders and analysts warn that the cost of the banking crisis, both in Thailand and elsewhere in Asia, still has to be paid in full.
"Looking at the big picture, the dollar's uptrend is still intact," said Hazell at Barclays.
Despite the progress on bank restructuring, few traders expect the baht to head much higher in the short to medium term, with the U.S. currency seen well supported at levels around 41.00 baht.
The U.S. dollar is also seen as well supported against other regional currencies, with S$1.7400 and 4.1500 ringgit regarded as likely floors against the Singapore dollar and the Malaysian currency over the coming week.
The U.S. currency was also at 4.1800 ringgit, down from 4.1950 late on Thursday.
Late in Asian trading yesterday the U.S. dollar was trading at S$1.7461, down from S$1.7520 the previous day.
The U.S. dollar also slipped against the rupiah yesterday, although regional currency traders were nervous over the possibility of political rallies scheduled for Monday's Independence Day holiday flaring into violence.
Late in Asia the U.S. dollar was at 12,750 rupiah, down from 12,925 a day earlier.
Should Monday's holiday pass off peacefully many market participants see the rupiah remaining fairly stable, or even strengthening slightly in the spot market, a view which some traders suggest may encourage aggressive market players to lend the Indonesian currency via the swaps market in order to pick up sky-high high rupiah yields.
The Philippine peso, too, strengthened against the U.S. dollar yesterday, while in North Asia the won and the new Taiwan dollar rose and the pressure on the Hong Kong dollar in the forward market eased somewhat.
At the close of trading on the Philippine Dealing System, the U.S. dollar was quoted at 43.05 pesos, down from 43.21 at Thursday's close.
Against the South Korean currency, the U.S. dollar ended at 1,325 won, down from 1,332.50 the day before.
Against the new Taiwan dollar, the U.S. currency finished domestic trading at NT$34.702, compared with NT$34.771 the previous day.