SE Asian currencies weaken

SE Asian currencies weaken

SINGAPORE (Dow Jones): Southeast Asian currencies closed marginally lower against the U.S. dollar in late Asian trade yesterday on moderate volumes, a trend largely in line with losses across most Asian stock markets.

The dollar's climb against the yen and a continued decline in the Russian ruble exacerbated already negative sentiment on the Singapore dollar, and poor corporate results in Malaysia pushed down the ringgit, market players said.

In a late trade, the dollar was traded at 144.66-68 yen, compared with 144.50 yen in early trading here and 144.34 yen in New York Tuesday afternoon.

A continuing rise in Hong Kong forward dollar rates also pointed to a weaker tone for Southeast Asian currencies.

"The devaluation in the ruble is causing the market to re- price debt and assets. This is creating a situation where the market is not having any appetite for any emerging market debt and is consequently affecting currency flows," said a major U.K. chief treasury economist, who asked not to be named.

Earlier Wednesday, the ruble was suspended for the second day in a row after the currency fell by more than 5 percent against its official rate.

"The market is little bit long on the dollar...maybe not as long as earlier in the week. But the market will still have this bias in favor of the dollar (against the regional currencies)," said the economist.

"The dollar-yen (rate) is creeping up marginally. We should see this having an impact on the dollar against the regionals," said the regional currencies head at a Japanese bank here.

The Singapore dollar was the most actively traded regional currency for the third consecutive day.

In a late trade, the U.S. dollar was at S$1.7741, down from its intraday high of S$1.7780, but up from S$1.7683 late Tuesday.

The general outlook is still to see the U.S. dollar strengthen against the Singapore dollar. Looking at the numbers of the export side, we expect the dollar to trade to S$1.80 in the next month," said Gerard Teo, senior regional economist at ABN-Amro Bank in Singapore.

"The general feeling is that there is more room to rise in the dollar-Sing," he said.

But in the short term, the Singapore dollar appears to be oversold, said the regional currencies head at a Japanese bank in Singapore. "The U.S. dollar may be overbought...there could be some retracement before the dollar resumes its rise again," said the trader.

Market sentiment was also damped on the Malaysian ringgit yesterday, said dealers.

In a late trade, the dollar was at 4.2150 ringgit, higher from 4.2100 ringgit late Tuesday.

The biggest factor affecting the ringgit was the 90 percent plunge in the earnings of Malayan Banking Bhd., Malaysia's biggest bank group.

"For now, the dollar is going to be well supported at 4.20 ringgit. There was a fair bit of interest today because people are worried about the (bad) corporate debt in the country," said the regional currencies head of a European bank.

The Philippine peso also closed lower against the dollar Wednesday, weighed by heavy demand for the U.S. currency due to the weaker Japanese yen and lingering regional concerns, said traders.

"Only a few banks were willing to sell dollars, most were on the buying side," a trader with a local bank said.

At the close Wednesday, the dollar averaged 43.632 peso on the Philippine Dealing System, up 39.3 centavos from Tuesday's average of 43.239 peso. The dollar was last traded at 43.57 peso.

Bucking the trend in Southeast Asia Wednesday was the rupiah, which continued to gain ground against the U.S. dollar.

In a late Asian trade, the dollar was at 11,063 rupiah, down from 11,200 rupiah in early trading and 11,100 rupiah late Tuesday.

In North Asia, the Hong Kong dollar was slightly weaker late Wednesday, after interbank interest rates fell from their early highs. The Hong Kong dollar was quoted at HK$7.7461 against the U.S. dollar in late Asian trading, just lower than the HK$7.7457 recorded late Tuesday. The Hong Kong dollar has traded in a range of HK$7.7420 to HK$7.7485 so far Wednesday.

Trading appeared to be entirely driven by interest rates, traders said, as investors bought Hong Kong dollars to take advantage of a spike in rates.

Similarly, the South Korean won closed slightly lower Wednesday as some local companies increased their dollar purchases on a belief that the dollar won't fall below 1,300 won anytime soon, traders said.

The U.S. currency closed at 1,308 won, higher than Tuesday's close of 1,307 won.

"Some local companies, including Korea Electric Power Corp. (KEPCO), bought the dollar believing that the dollar is cheap," Lim Hun-jong, a trader at the Seoul office of National Bank of Chicago said.