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.