SE Asian currencies up but pressed by falling yen

SE Asian currencies up but pressed by falling yen

SINGAPORE (Dow Jones): Southeast Asian currencies were
generally higher after overnight trading against the U.S. dollar
compared with levels seen late Monday in Asia, but they faced
renewed pressure from a weakening yen early yesterday.

"The currencies are, as usual, tracking the movement of the
dollar/yen," one trader at a U.S. bank said.

Japan's Finance Minister Kiichi Miyazawa said yesterday
morning the government would intervene if exchange rates
movements were disruptive, then added he thought recent moves
weren't disruptive.

The market immediately started buying U.S. dollars, traders
said, quickly taking the U.S. currency back up to the Y144 level.

Activity in regional currencies remains lackluster because of
a lack of liquidity, traders said.

Market players said there was still keen interest in selling
the Singapore dollar against the U.S. dollar, a move driven
largely by the widely held perception that the strength of the
local currency was hurting the country's export competitiveness.

Comments Monday by the Monetary Authority of Singapore, the
country's de facto central bank, that it now had more flexibility
in managing the currency, was taken by markets to mean that the
currency could drift lower in the short-term.

The U.S. dollar, which traded at an intraday high of S$1.7745,
eased lower in late trading yesterday and failed to keep above
the crucial S$1.7720-25 level.

"This (S$1.7720) was the previous resistance for the (U.S.)
dollar when it climbed to S$1.80 earlier this year. It needs to
break this resistance to climb to S$1.80," said Derrick Lee, a
senior currency analyst at MCM International.

Singapore-dollar selling was also witnessed in cross trading
against the ringgit, whose high interest rate yields were the
biggest draw, said market players. The short term target for the
ringgit is seen at S$0.4250-70, they said.

At in late Asian trade, the U.S. dollar was quoted at
S$1.7683, up from yesterday opening levels of S$1.7655 and
S$1.7677 in late Monday dealings. The ringgit was quoted at
S$0.4216, up from S$0.4210 early Tuesday and S$0.4193 late
Monday.

Elsewhere in Southeast Asia, the rupiah gained marginally
against the dollar in fairly thin trading. The fall in the dollar
versus the rupiah continued to be driven by the anticipated
disbursement of another US$1 billion in aid from the
International Monetary Fund to the country.

"The rupiah performed pretty well today. It might come down to
below 10,000 rupiah (versus the dollar) in the short term but
there is probably going to be some good buying support at 9,500
rupiah," said Lian at ANZ.

The dollar is at 11,175 rupiah, down from 11,500 in early
Tuesday trading and from 11,300 late Monday.

In the Philippines, the peso closed marginally lower against
the U.S. dollar, after opening strong yesterday. The peso opened
at PHP43 to the U.S. dollar, its highest level for the session,
as regional markets sold dollars on overnight fears of yen-
supportive intervention from the Japanese government.

But at the close in the onshore market, the dollar averaged
43.239 pesos on the Philippine dealing system, up 6.6 centavos
from Monday's average of 43.173 pesos. The dollar was last traded
at 43.37 pesos.

Meanwhile, in North Asian markets, the Hong Kong dollar
strengthened sharply yesterday, as speculators scrambled to
unload short positions in the face of rising local interest
rates, traders said.

"All the focus" is on interbank lending rates, said one
currency trader. Late yesterday, the volatile overnight Hong Kong
Interbank Offered Rate was quoted at 12.00 percent, compared with
10.00 percent late in the previous session. It had been near 16
percent earlier in the day. The three-month rate was quoted at
13.00 percent, up from 12.00 percent late Monday.

Traders said the higher interest rates made it more expensive
to maintain speculative short positions against the Hong Kong
dollar and local equities, prompting some speculators to buy the
currency in the spot market to cover their positions in the
futures market.

In South Korea, the won closed slightly lower yesterday as the
yen eased against the dollar in Asian trading, traders said. The
U.S. currency closed at 1,307 won, higher than Monday's close of
1,306 won, they said.

Besides the dollar's strengthening against the yen, the U.S.
currency was also helped by state-run Korea Development Bank,
bidding to buy the dollar at 1,300 won.

"The bank appeared to be supporting the dollar on request of
the government, which doesn't want the dollar to fall further," a
trader at a local bank said. "The bank also offered to sell the
dollar at 1,310 won."