SE Asian currencies static; Fed cut has little impact

SE Asian currencies static; Fed cut has little impact

SINGAPORE (Dow Jones): Southeast Asian currencies marked time
on Wednesday, trading sideways through Asian hours.

While most traders and analysts regard Tuesday's 25 basis
point cut in U.S. short term interest rates as a plus for Asia,
as long as the yen remains range-bound - which it did throughout
Asian hours on Wednesday - there is little appetite for regional
currencies.

In North Asia, however, the South Korean won rallied strongly
forcing the U.S. dollar below the 1,300 won mark for the first
time since early August as Korea's swollen current account
surplus and healthy inward investment lifted the local currency.

By the close of trading in Seoul the U.S. currency had dropped
to 1,294 won, down from 1,304.50 won at Tuesday's close.

But Southeast Asian markets remained largely static despite
the Federal Reserve's action, with most currencies in the region
ending the day barely changed.

Although there was little immediate reaction to the Federal
Reserve's easing, in the long run lower interest rates in the
U.S. will help support Asian currencies, according to Don Hanna,
regional economist at Goldman Sachs in Hong Kong.

"What really matters in determining the performance of
regional currencies over the long haul is the level of underlying
economic activity. Insofar as the Fed rate cut is inoculation
against recession, in the longer time frame this is positive for
Asian currencies," Hanna said.

Sales of the U.S. dollar pushed the U.S. currency down through
the 36.30 baht mark, a level at which some traders had earlier
suspected the presence of the Bank of Thailand bidding to buy
dollars.

Late in Asia, the U.S. dollar was quoted at 36.2500 baht, down
from 36.3350 baht at the same time the day before.

Among other regional currencies, the Singapore dollar dropped
back a fraction, with the U.S. currency ending Asian hours at
S$1.6337, up from S$1.6320 late the previous day.

The U.S. dollar had earlier encountered support from local
banks bidding above S$1.6300, leading some traders to speculate
that the Monetary Authority of Singapore was attempting to cap
the local currency at that level.

"The MAS doesn't want to see the Singapore dollar get too
strong," said one trader at a U.S. bank in the island republic.

The Philippine peso also weakened on Wednesday. At the close
of trading on the Philippine Dealing System, the U.S. dollar
ended at 39.950 pesos, down from an intraday high of 40.100
pesos, but above 39.895 pesos at Tuesday's close.

The new Taiwan dollar, too, closed lower, as the U.S. dollar
ended trading in Taipei at $32.533 New Taiwan dollars (NT), up
the barest fraction from NT$32.530 the day before.

True to its recent form, the rupiah went its own way on
Wednesday. The Indonesian currency began the day on a firmer note
after offshore players were seen closing out short positions in
the rupiah, discouraged by the high funding costs.

The local currency remained steady throughout the rest of
Asian dealing. As interbank trading drew to a close in Singapore,
the U.S. dollar was being quoted at Rp 7,467, little changed from
Rp 7,450 the previous day. Within an hour, however, the U.S.
currency shot up to hit a high of Rp 7,700 as fears of fresh
political unrest triggered dollar bids from Jakarta-based market
participants.