SE Asian currencies remain flat due to spiraling yen

SE Asian currencies remain flat due to spiraling yen

SINGAPORE (Dow Jones): The breathtaking plunge of the Japanese
yen to new eight-year lows dragged Southeast Asian currencies
into a vicious downward spiral during Asian trading yesterday.

As stock markets throughout the region plummeted, the U.S.
currency spurted up through resistance at 147.00 yen to hit a
peak during Asian hours of 147.61 yen, its highest level since
Aug. 20, 1990. In response, market participants bid up the U.S.
dollar against Asia's regional currencies, many of which were
pushed to their lowest levels in weeks, or even months.

"All the regional currencies are moving in tandem with the
yen," complained a senior treasury executive at a Singapore bank,
as the Singapore dollar dropped to its lowest level against the
U.S. dollar since Jan. 23, at the height of Southeast Asia's
currency crisis.

The rapidity of the yen's fall spells only bad news for other
Asian economies, said analysts, with some market observers
arguing that nothing short of concerted intervention by the
central banks of the Group of Seven leading industrial nations
can avert another disastrous meltdown in the region's foreign
exchange markets.

Although observers regard that scenario as overly pessimistic,
few doubt that if the U.S. dollar does rise to 150 yen over the
coming days - the next level targeted by many foreign exchange
traders and strategists - there will be more downward pressure on
regional currencies.

"There will be more weakness. But if the yen goes to 150 yen
(to the U.S. dollar) it won't necessarily cause another downward
spiral in Southeast Asian currencies," said Raymond Lim, chief
regional economist at ABN Amro Bank in Singapore, arguing that
regional currencies are unlikely to fall below the lows seen in
January.

Despite the gloomy predictions of analysts, the falls in
Southeast Asian currencies Tuesday could have been far more
severe than they actually were, said traders.

"There is no very aggressive dollar buying against the
regionals. In fact, the dollar is looking offered against the
Singapore dollar and the baht," said the head of regional
currency trading at a U.S. bank in Singapore, as the U.S.
currency hit its high against the yen.

Market players who for weeks or even months had been sitting
on long U.S. dollar positions against regional currencies took
advantage of the U.S. currency's surge higher to liquidate their
positions and book profits, he explained.

Late in Asian trading, the offers had driven the U.S. dollar
off its intraday high against the Singapore dollar of S$1.7625
dollar to trade at S$1.7595. Late Monday the U.S. currency was at
S$1.7518.

The U.S. dollar also retreated from intraday highs against the
baht to end Asian trading hours at 42.1550 baht (THB), off its
earlier high of THB42.42, but still well above THB41.7350 late
the previous day.

Although the dollar sales took some of the steam out of the
U.S. currency's rise against the Singapore dollar and the baht,
there was little relief for the embattled ringgit.

Throughout the day, traders at U.S. banks in Singapore
reported that U.S. funds were selling the ringgit against the
Singapore dollar in the cross market in regional currencies.

Fund managers sold the ringgit against the U.S. dollar and
partially offset the trade with purchases of the Singapore dollar
as a bet that the Malaysian currency will depreciate relative to
the Singapore dollar in response to recent monetary easing by
Bank Negara, said traders.

Late in Asian trading the U.S. dollar was quoted at 4.2544
ringgit, up from 4.2260 ringgit. Against the Singapore dollar,
the ringgit slipped to S$0.4133, down from S$0.4164 toward the
end of Asian trading on Monday.

In trading on the Philippine Dealing system, the second
interest rate rise in two days proved sufficient to bolster the
peso in the face of speculative selling pressure. At the close of
trading, the U.S. dollar stood at 43.61 pesos, down from 44.18
pesos at Monday's close after the central bank announced a three
percentage point hike in its overnight lending rate to follow
Monday's two point rise.

In trading in North Asian markets, both the South Korean won
and the New Taiwan dollar were pushed lower in response to the
yen's fall.

Against the South Korean currency, the U.S. dollar closed at
1,339 won, higher than Monday's close at 1,338 won. Against the
Taiwanese currency, the U.S. dollar rose to NT$34.810, compared
with NT$34.781 at Monday's close.