SE Asian currencies gain in lackluster trading
SE Asian currencies gain in lackluster trading
SINGAPORE (Dow Jones): Southeast Asian currencies were marginally higher against the U.S. dollar in late trading Thursday, compared with levels seen Wednesday.
The bulk of trading activity focused on filling one-off commercial orders, traders said, with interbank players sitting on the sidelines.
"This week (trading) has been particularly sparse, as there has been a move to reduce exposure to the risks associated to the region," said a trader at a major U.K. bank.
"The big global questions - interest rate cuts and the impact of shocks in markets such as Latin America - have taken the focus off Asia."
His comments characterize what traders and economists are calling the post-shock phase, where markets are quiet following a period when currencies moved in leaps and volatile bounds.
"The question now is what event will occur to spark movement in regionals," said Jonathan Hazell, chief strategist at Barclays Capital.
The lack of regional liquidity is creating an odd scenario where traders - seeing a swing in the market - have to ask if the volatility is "just another stone in the pond" or "a genuine event," said an economist at a U.S. bank.
In a late trade, the U.S. dollar was trading at S$1.7165, down from S$1.7257 in late Asian trading Wednesday. The U.S. currency moved sideways in intraday trading, but only after falling overnight, when a US$50 million buy order for Singapore dollars pushed the U.S. dollar as low as S$1.7140.
"Investors now look comfortable to be long U.S. dollars at this level. No one is eager to sell," said a trader at a Japanese bank.
The U.S. dollar is flat against Indonesia's rupiah at 10,975 in the late Asian trade, unchanged from late trading Wednesday.
Baht
Thailand's currency doesn't have the same liquidity woes, traders said. They noted that the U.S. dollar is trading at 40.60 baht, down slightly from 40.80 baht in late trading Wednesday, as the baht has been a pillar of consistency in recent weeks.
"The central bank is making real progress in trying to devise a workable program for banks to resolve debts," said one regional economist at a U.S. bank.
It (the Thai central bank) is focusing on nitty-gritty problems, which is a good sign because those are the important details in getting banks on track," the Singapore-based U.S. economist said.
He used the sticky problem of delinquent loans, where customers are holding money for fear that credit will be cut off if they pay back loans, as a prime example.
"This is artificially inflating non-performing-loan figures, so there is a proposal to establish a code of conduct to penalize delinquency," he said. "It's a small but important action, showing that Thailand is serious about rectifying the banking problem."
The baht is expected to remain range-bound between 40 baht and 42 baht, "at least until some fundamental news breaks, either in Thailand or the region," said a trader at a Thai bank in Singapore.
In North Asia markets, the U.S. dollar is trading at 1,383 won, up from 1,376 won in late trade Wednesday. Banks and corporations bought U.S. dollars in intraday trading to pay off outstanding foreign debts, trader said.
"One of the reasons for the won's strength in recent months is the focus on the current-account surplus figures," said Hazell.
But inventories have been largely depleted, he said, which will lead to an acceleration in export contraction. The knock-on effort will be weaker net U.S. dollar balances, meaning onshore rates for the won will erode as the dollar becomes increasingly valuable.
In Taiwan, the U.S. dollar is trading at NT$34.491 in late trading Thursday, down from NT$34.505 Wednesday.
Taiwan's currency continued to strengthen in late trading after news reports that the central bank had intervened in the market.
The action - along with a relatively stable yen in intraday trading - kept the local currency within a tight trading band against the U.S. dollar during the day, traders said.
In the Philippine Dealing System, the U.S. dollar is trading at 43.78 pesos, up slightly from 43.77 pesos Wednesday. As in South Korea, corporate demand for the U.S. dollar in intraday trading weighed the peso down, traders said.