SE Asian currencies slip, but mid-term view positive
SE Asian currencies slip, but mid-term view positive
SINGAPORE (Dow Jones): The yen re-exerted its baleful influence over regional foreign exchange markets on Tuesday, dragging Southeast Asian currencies lower against the U.S. dollar.
Although the Philippine peso held its ground, the Singapore dollar, Thai baht, Korean won and new Taiwan dollar all eased back, as the U.S. currency nosed higher against the yen.
The slippage was modest, however, and insufficient to persuade market participants to reverse their generally bullish medium- term outlook for Asian regional currencies.
"The regionals are pretty resilient, despite the strength of the dollar against the yen and the mark," said the head of foreign exchange at one Japanese bank in Singapore.
"It looks like some money is coming back into the region," he explained, saying that the market expects the minor Asian currencies to remain relatively strong against the U.S. dollar into the new year.
The recent cuts in U.S. interest rates have initiated a "virtuous circle" in regional markets, according to Chan Chia Lin, head of Asian economic research at ABN Amro in Singapore.
Lower U.S. interest rates have allowed monetary authorities throughout Asia to bring down their own interest rates without jeopardizing regional currencies, which attracted capital to local equity markets, boosting stock prices, which in turn attracted more capital inflows.
The January effect has started already in November," said Anand Aithal, regional equity strategist at Goldman Sachs in Singapore. He explained that investors are buying into regional markets now in anticipation of healthy inflows as institutions allocate assets back to Asia in the new year.
And where Asia's stock markets have led, regional currencies are following.
"It's very safe to say a liquidity-driven rally is already happening," he said.
So powerful has been the surge that many traders and analysts fret that, having overshot to the downside earlier in the year, regional currencies are now overshooting on the upside. Since mid-year, for example, the rupiah has strengthened 95 percent, the baht 16 percent and the won nearly 10 percent.
Late in Asian trading, the U.S. dollar was quoted at S$1.6392, up from S$1,6335 at the same time the previous day. Against the baht, the U.S. currency was at 36.1711 baht, up from 36.1650 baht.
The rupiah also slipped, with the U.S. dollar inching up to 7,600 rupiah, compared with 7,424 rupiah late on Monday.
On the Philippine Dealing System, however, the peso held its own as the central bank trimmed 25 basis points off its key interest rates, boosting the local stock market by 2 percent.
At the close of domestic trading, the U.S. dollar was quoted at 39.60 peso, down from 39.68 peso the day before.
In North Asian markets, both the new Taiwan dollar and the won eased slightly. Against the Taiwanese currency, the U.S. dollar ended at NT$32.490, compared with NT$32.426 at Monday's close. Against the won, the U.S. currency finished at 1,252 won.
In Tokyo, the dollar was quoted at 121.61-64 yen against 121.40-43 yen in mid-morning trade and 120.95 yen in New York late Monday.
Against the mark, the dollar was quoted at 1.7086-89 marks, compared with 1.7067 marks in early trading here and 1.7035 marks in New York late Monday.