SE Asian monies down as central banks step aside

SE Asian monies down as central banks step aside

HONG KONG (Dow Jones): The slide in Southeast Asian currencies
accelerated during local trading Thursday, as the Thai baht, the
Singapore dollar and the Philippine peso all dropped to set new
long-term lows.

Analysts struggled to place a finger on any specific reason
for this latest selloff in regional foreign exchange markets.

Country-specific factors including high levels of non-
performing loans in Thailand, concerns over the Philippines'
fiscal deficit and a moderately disappointing August export
performance in Singapore were all mentioned.

But one clear common factor in the weakness of all of the
Southeast Asian currencies was the reluctance of local central
banks to intervene in the market in support of their currencies.

"The central banks have all stood aside and let the market
take the currencies weaker. They are not unhappy with the
situation," said Vincent Low, a regional economist at Merrill
Lynch in Singapore.

The Bank of Thailand's Deputy Governor Kitti Patpongpibul
underlined the point Thursday, echoing comments made the previous
day by Deputy Finance Minister Pisit Leeatam, who told listeners
to a local radio program that the baht's slide was not "unusual."

If the currency's fall was not unusual, it certainly was
pronounced. Asian trading Thursday saw the baht drop by 1.5
percent, as consistent dollar bids drove the U.S. currency up
through successive stop loss triggers to hit a high of 40.98
baht, the dollar's highest level in a year. Late in Asian trading
the previous day the U.S. dollar had been quoted at 40.3650 baht.

The Monetary Authority of Singapore, too, was conspicuous by
its absence from the market Thursday, as selling pressure pushed
the Singapore dollar to a three and half month low.

According to one trader at a local bank, the local currency's
fall was propelled largely by speculative selling after
Singapore's trade minister Wednesday said a weaker currency was
"always helpful to exporters."

By late in Asian trading the U.S. dollar had risen to its
highest level since early June to be quoted at S$1.7150, up from
S$1.7076 the previous day.

The Philippine peso was also allowed to fall unimpeded,
dropping to its lowest level since last November during intraday
trading, as the dollar rose to a high of 40.700 pesos.

At the close of local trading in Manila, the U.S. currency had
settled slightly to trade at 40.600 pesos. At Wednesday's close
the dollar had been quoted at 40.330 pesos.

Much of Thursday's depreciation in regional markets was driven
by foreign portfolio investors retreating ahead of a feared new
year liquidity trap and by domestic factors including quarterly
debt servicing.

But traders and analysts did report some speculative selling
in markets across the region.

"I would be careful about drawing any parallels with the
events of two years ago, but some of the low yielding regional
currencies have attracted short selling interest in the offshore
market," noted David Simmonds, foreign exchange strategist at
Citibank in Singapore.

Even so, there was no sign that regional central banks would
consider raising interest rates to support their currencies.

Regional monetary authorities appear determined to keep
interest rates as low as possible in order to ease the cost of
their fiscal spending, relieve the pressure on their banking
sectors and encourage an upturn in corporate activity. At the
same time weaker currencies are welcomed as a boost to exporters.

In North Asia, the New Taiwan dollar remained isolated from
the Southeast Asian selloff, the central bank continued to sit
firmly on any latent market volatility following Tuesday's
earthquake.

At the end of the local session the U.S. dollar was quoted at
NT$31.795, unchanged from NT$31.796 at Wednesday's close.
Markets in Seoul were closed for a holiday.