SE Asian currencies rise on yen's surge

SE Asian currencies rise on yen's surge

SINGAPORE (Dow Jones): Southeast Asian currencies rose across the board Wednesday on the back of overnight gains in the Japanese yen.

The yen got a boost more from the political problems of U.S. President Bill Clinton rather than any good news in Japan, dealers say. The dollar slipped against other major currencies after news broke that former White House intern Monica Lewinsky will testify before a grand jury about her relationship with the president.

Regional currencies benefited from the dollar's woes, as well, but the Singapore dollar broke from the pack in morning trading on strong demand for U.S. dollars. Some dealers implied the demand came from the city-state's central bank.

An official at the Monetary Authority of Singapore said the MAS has a policy never to comment on open market operations.

Late in the day, however, the Singapore dollar managed to strengthen beyond levels seen as Asian trading wound down Tuesday.

In a late trading, the U.S. dollar was quoted at S$1.7085, down from S$1.7122 late Tuesday in Asia.

Some talk in the market blamed bearish Singapore dollar sentiment on Tuesday's news that gross domestic product in the first half of 1998 had grown only 3.8% over the same period the year before.

Friedrich Wu, head of economic research for the Development Bank of Singapore, said it was unlikely that confirmation of a market expectation will have much affect on the currency going forward, however.

"There is a possibility - although not a probability - that economic growth will go into negative territory for the full year, but it definitely will in the second half, and most likely in the third and fourth quarter next year, as well," Wu said.

"But these domestic figures should not have much impact on the currency. I think people have already taken them into account," he said, adding that the same generally holds true for other regional currencies.

"To move the currencies, we have to have some developments either in Tokyo or Jakarta over the next couple of months," Wu said.

Political jostling in the midst of a deep recession has cast the yen adrift over the past several weeks, while currency dealers in Singapore have been simultaneously apprehensive over the possibility of further social unrest in Indonesia and hopeful that international benefactors will come to the rescue with an injection of capital.

In a late Asian trading, the U.S. dollar was quoted at 13,087 rupiah, down from 13,400 rupiah late Tuesday.

Traders will be watching the annual meeting of the Consultative Group on Indonesia overnight in Paris. The CGI is a group of countries that serve as international lenders to Indonesia.

Some market participants expect that Indonesia will receive significantly more than the US$5.3 billion the group pledged last year, and the currency strengthened Tuesday in anticipation.

Callum Henderson, Asian currency economist for Citibank in Singapore, says any good news for the rupiah could spur gains in other regional currencies.

"A depressed dollar against the rupiah is a negative factor for the dollar against the Singapore dollar or the ringgit," he said. "They do have a pretty strong correlation."

Henderson said market players remain so short regional currencies that they may need to rise before they can fall again.

"Moody's downgrade of Malaysia last week was not a surprise, but the extent of it was a shock," Henderson said. Moody's Investor's Service cut Malaysia's sovereign rating three notches to Baa2.

"But the market took it relatively in stride. With all the long dollars it is difficult to make further headway against regional currencies right now. We may have to see some positions shaken out before the dollar has the momentum to go higher," Henderson said.

In a late trading, the U.S. dollar was quoted at 4.1115 ringgit, down from 4.1250 ringgit late Tuesday.

The Thai baht exhibited similar behavior Wednesday, shrugging off news that Moody's had put six banks on review for possible downgrade.

The U.S. dollar was quoted at 40.6550 baht, down from 40.9750 baht Tuesday.