SE Asian currencies show moderate positive gains

SE Asian currencies show moderate positive gains

SINGAPORE (Dow Jones): Southeast Asian currencies rose across
the board against the U.S. dollar during Asian trading Tuesday,
led by moderate to strong gains in the Thai baht, Singapore
dollar, Chinese yuan and New Taiwan dollar.

Weakness in the U.S. dollar versus the yen Tuesday, rising
expectations of further cuts in the U.S. Fed funds rate and
caution on the part of hedge funds speculating in Asian
currencies contributed to the strength of regional currencies
Tuesday, said market players.

The dollar fell in early Asian trading Tuesday to 132.52 yen
around 08:35 GMT from 134.32 yen Monday.

In Asian currencies, the Chinese yuan ended Tuesday onshore at
its strongest point against the dollar since April 30. The
Singapore dollar broke above the psychological S$1.68 level to
the U.S. dollar while the New Taiwan dollar rose to a more than
four-month high against the U.S. dollar.

"We don't expect a big change in the trend. In the big
picture, we see the dollar-yen (dollar versus the yen) going down
to 128.00-129.00," said Daniel Lian, head of Asian markets
research at ANZ Investment Bank in Singapore.

"On the back of the strengthening of about four yen, there is
room for the Asian currencies to strengthen a bit more," he said.

"The focus of the Asian currencies remains on the softer U.S.
dollar in the near term. With international banks tightening
credit as a result of the U.S. hedge fund (Long Term Capital
Management) debacle, there would be less risk appetite by
offshore financial institutions to engage in speculative
activities against the region's currencies," said a strategist at
Standard Chartered Bank in Singapore.

"Instead, there is some talk that funds may be looking once
again at high yield plays," said the strategist.

Among the highlights of Tuesday's trading was the gain in the
Chinese yuan, said market players.

Falling dollar demand and reports of a top government
minister's reconfirmation that China won't devalue its currency
pushed the yuan higher Tuesday, traders said.

They said a crackdown on illegal currency transactions - which
began in earnest early last month - has shaved demand for dollars
by stopping a large number of dollar-buying orders reaching the
official exchange.

In onshore trading Tuesday, the U.S. dollar closed at 8.2779
yuan, down from 8.2781 on Monday. It traded within the range of
8.2778 to 8.2781 range.

Benefiting on the back of the yuan was the New Taiwan dollar,
which rose Tuesday to a more than four-month high against the
U.S. dollar. Exporters and holders of foreign currency deposits
were the main sellers of U.S. dollars, said market players.

At 08:00 GMT, the U.S. dollar ended lower at NT33.457, the
lowest closing level since NT$33.230 on June 1, and down from
Saturday's NT$33.710 close. Trading volume soared to a 10-month
high of US$718.5 million from Saturday's half-day session of
US$324.0 million.

Similarly, the Philippine peso closed higher against the
dollar Tuesday in local trading. At the close, the dollar
averaged 43.778 peso on the Philippine Dealing System, down 12.8
centavos from Monday's average of 43.906. The dollar was last
traded at 43.780 Tuesday. Volume totaled $108.5 million, compared
with $90.5 million Monday.

"The yen's gains are allowing the peso to appreciate further
in the absence of any major commercial demand for dollars," a
trader with a foreign bank said.

In southeast Asia, the Thai baht and the Singapore dollar
figured as the day's top performers, market participants said.

The entry of a new party into the coalition of Thai Prime
Minister Chuan Leekpai continued to bolster sentiment toward the
baht, said traders.

"If the 38.50 baht level against the dollar gives way, the
next level to watch is 37.20. There are still a lot of investment
inflows into the country," said Derrick Lee, senior currency
analyst at MCM Asia Pacific.

Technically, the key medium-term support for the U.S. dollar
is found at 37.00 baht, this year's low hit in April, said a
Barclays Capital strategist. The main plus factor for the baht is
the effort by government to mitigate future systemic risks in the
banking system, said the strategist.

At 0954 GMT, the dollar is at 38.8950 baht in onshore trading,
down from 39.1750 late Monday. The dollar traded at 39.0500 in
early Asian trading.

Against the Singapore dollar, the U.S. dollar fell below the
psychologically important S$1.68 level on the back of gains in
other regional currencies. With the yen expected to strengthen
further, market players said the downside for the U.S. dollar has
been revised lower. The current target is for the dollar to head
lower to S$1.6600, said Derrick Lee at MCM Asia Pacific.

Against the Singapore dollar, the U.S. dollar was quoted at
S$1.6791, down from S$1.6853 late Monday.

The often quietly traded rupiah also gained ground against the
U.S. dollar. After skirting around the key Rp 10,000 to the
dollar level all day, the Indonesian rupiah was trading at 10,050
late Tuesday, as renewed rumors about the government's plan to
increase monitoring of capital flows sparked dollar selling. The
dollar was quoted at 10,475 late Monday.

The Indonesian currency tested the 10,000 level all day,
traders said, but failed to hit it or break it.