SE Asian monies firmer as funds flow back

SE Asian monies firmer as funds flow back

SINGAPORE (Dow Jones): Southeast Asian currencies were
stronger against the U.S. dollar in late trading Thursday, as a
groundswell of positive sentiment over Japan's ongoing efforts to
fix its ailing economy pushed funds back into the region, traders
and economists said.

"The improvement of sentiment towards Japan has relieved the
pressure on regional currencies," said Kate O'Donoghue, regional
economist at Barclays Capital. "The regional central banks will
take this opportunity to build up their foreign reserves so we
probably won't see currencies strengthen dramatically."

Despite the sudden appreciation of the yen against the U.S
dollar to 118.55 and signs that multi-billion yen packages will
be dropped on the region as well as Japan's embattled banking
system, economists expect the U.S. dollar to gradually strengthen
to around Y130 by the end of the year.

"There no signs yet that Japan has bottomed out. The yen will
weaken but when it does, we will see a minimal weakening of other
Asian currencies," said Fong Cheng Hong, head of emerging market
research at Nomura Singapore.

Countries such as Thailand, Singapore and the Philippines are
set to reap the benefits of capital inflows, "because investors
are feeling much more comfortable with Asia's markets," said one
economist at a U.S. bank.

"Of course, there is still pain to go through for countries
such as Thailand and Indonesia, where the recapitalization
process is by no means over - or even started, for that matter.
But from the investors' point of view, the picture is now
clearer."

At 1000 GMT, the U.S. dollar is trading at S$1.6123, well down
from S$1.6216 in late trading Wednesday.

The U.S. dollar's fall suggests "further unwinding of short
Asian currency positions as the U.S. dollar continues to
consolidate after its fierce moves last week," according to
Paribas' daily foreign exchange commentary. "Even evidence of
slowing growth failed to weaken the local currency, as a slowdown
in growth is already very much discounted."

Sentiment for the Singapore dollar was also buoyed by reports
on Wednesday that a corporate tax cut might be arrive in
November.

The U.S. dollar is also trading at 8,710 rupiah, flat against
levels seen late Wednesday. Intraday trading pushed the dollar as
low as 8,500.

Investors have been encouraged by Bank Indonesia Governor
Sjahril Sabirin's comments this week that Indonesia authorities
are not planning to implement capital controls, and that rates
for three-month Sertifikat Bank Indonesia notes should continue
to fall as the government eases monetary policy.

The steady tone of the rupiah is also supported by anecdotal
reports of global fund managers taking a renewed interest in
Indonesian blue chips," Paribas said in its report. "With the
risks reduced significantly from the paralysis of hedge funds,
investors are likely to get further reprieve from lower interest
rates."

The U.S. dollar is also trading at 37.90 baht, down from 38.08
baht Wednesday. If the dollar stays below 38 baht, it could test
this year's intraday low of 37.65 baht, which was reached March
30, traders said.

"The baht has strengthened as regional currencies have
strengthened, but I'm not hearing aggressive sell orders in the
market at the moment," said a trader at a Japanese bank. He
expects the baht to trade sideways between 37 baht and 40 baht,
and doesn't foresee central bank intervention.

Traders have expected intervention as the baht climbed above
38.50 baht and now 38 baht, but Thai Deputy Prime Minister
Supachai Panitchpakdi said earlier this week that the country's
"flavor of the month" status with investors has meant positive
capital inflows and a stronger baht - despite falling interest
rates, which are now around 8 percent from 24 percent at the
beginning of the year.

The U.S. dollar is also trading at 43.20 pesos, slightly lower
that 43.255 peso in late trading Wednesday. In North Asia, the
U.S. dollar is trading at 1,334 won, down slightly from 1,350
won; and at 32.946 New Taiwan dollars, down from NT$33.277, a
result of central bank intervention to keep the U.S. dollar below
NT$33, traders said.