SE Asian currencies fall on yuan devaluation fears
SE Asian currencies fall on yuan devaluation fears
SINGAPORE (Dow Jones): Southeast Asian currencies ended a
whipsaw trading session on Tuesday mixed against the U.S. dollar.
After trailing the yen higher throughout the Asian morning,
regional currencies saw an abrupt sell-off in afternoon dealing
on resurgent fears of a Chinese yuan devaluation.
Market participants scampered to buy U.S. dollars after rumors
emerged that the Shanghai branch of the People's Bank of China
had initiated a study to investigate the economic impact of a
possible devaluation of the yuan.
Shanghai sources stressed that Beijing's commitment to a
stable yuan remains rock-solid and emphasized that the PBOC study
was being conducted solely as an independent academic exercise.
Nevertheless, rumors of the study were sufficient to trigger a
bout of dollar-buying against both the yen and the freely-traded
Asian regional currencies.
In North Asia, both the South Korean won and the New Taiwan
dollar recovered from their intraday lows to end domestic trading
a touch higher on the day, with the Taiwanese currency being
bolstered by heavy central bank intervention.
In Southeast Asia, the Singapore dollar and Philippine peso
were sold down in response to the yuan fears.
The Thai baht, however, held its own in a day of hectic
dealing enlivened by flurries of rumors that the Bank of Thailand
was planning to tighten restrictions on domestic banks' baht
loans to the offshore market.
The rumors first surfaced late in Asia on Monday. Fearful of a
baht liquidity squeeze in the offshore market, overnight traders
in London and New York drove the interest rate implied by U.S.
dollar/baht swap rates sharply higher.
By late in Asian trading, the U.S. dollar had stabilized
around 37.3000 baht, up from its earlier low, but well down from
37.4750 baht in late Asian dealing the previous day.
Trading in other regional currencies was dictated largely by
moves in the U.S. dollar/yen exchange rate.
After being sold down to a low of S$1.7247 against the
Singapore dollar, the U.S. currency rallied sharply in afternoon
trading in response to the market's heightened fears of a yuan
devaluation.
The Indonesian rupiah continued to trade in isolation from
other regional markets. Despite dealers' natural inclination to
bid up the U.S. dollar in response to continuing social unrest in
Indonesia's provinces, the U.S. currency remains capped by state
bank offers at Rp 9,000, which are widely believed to have been
placed by Bank Indonesia.
The U.S. dollar ended the day at Rp 8,975, little changed from
Rp 8,940 the previous day.
Late in Asian dealing, the U.S. dollar was quoted at S$1.7322,
up from S$1.7275 late the day before.
On the Philippine Dealing System, the U.S. currency bounced
back from its low against the peso at 38.830 pesos to end the
session at 39.095 pesos, up from 38.990 pesos at Monday's close.
In domestic dealing in Taipei, the Taiwanese central bank
entered the market late in the session, buying the local currency
to force the U.S. dollar down from its intraday high of NT$33.219
to close at NT$33.136. On Monday the U.S. currency closed at
NT$33.142.
Against the won, the U.S. dollar ended domestic trading at
1,235.50 won, down from 1,239.50 won at Monday's close.