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.