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."