SE Asian currencies rise after Japanese yen rallies
SE Asian currencies rise after Japanese yen rallies
SINGAPORE (Dow Jones): Caught short by the rally of the Japanese yen, market players bought back Southeast Asian currencies during Asian trading hours yesterday, driving the regional currencies higher against the U.S. dollar.
The Malaysian ringgit and the Singapore dollar led the move as the U.S. funds and investment banks who on Monday had sold the currencies short in anticipation of further depreciation were forced to cover their positions by the yen's run up.
"They were caught short at a very bad level and had to unwind," a trader at a Dutch bank in Singapore said.
The rebound saw the ringgit and the Singapore dollar regain some of the ground they had lost the previous day when the market hammered them lower in response to what was perceived as a loosening of Malaysia's monetary policy.
By late in Asian trading the ringgit had strengthened considerably with the U.S. dollar dropping back to 4.1250 ringgit, compared with 4.1710 ringgit late the day before.
Against the Singapore dollar the U.S. currency was at S$1.6915, down from S$1.7160.
The Thai baht also rose Tuesday, with the U.S. dollar dropping to end Asian hours at 42.1550 baht, down from 42.3750 baht the previous day, after the Bank of Thailand earlier assumed control of four ailing banks.
Offshore fund managers who had bid up the U.S. dollar on uncertainty over how the banks were to be dealt with took the central bank action as their cue to book profits, traders said.
"The central bank calmed fears of a run on the banking system and brought some confidence back into the market, strengthening the baht. This was more than just the yen's rally at work here," the Dutch bank trader said.
Among other regional currencies the rupiah ended the day slightly lower against the U.S. dollar.
With no underlying customer interest to trade the Indonesian currency, the rupiah's moves are attributable to the handful of banks who are still prepared to quote prices adjusting their quotes in line with the rise in the yen, traders said.
With the Philippines closed for a public holiday marking the inauguration of President Joseph Estrada, no peso trading took place on the Philippine Dealing System.
In North Asia, both the new Taiwan dollar and the won ended higher in parallel with the yen.
Against the Taiwanese currency the U.S. dollar ended trading at NT$34.351, down from NT$34.551 the day before.
The U.S. dollar also ended at 1,373 won, down from 1,383 won at Monday's close.