SE Asian monies mostly down; Singapore dollar safe haven
SE Asian monies mostly down; Singapore dollar safe haven
SINGAPORE (Dow Jones): Southeast Asian currencies -- with the exception of the Singapore dollar -- were lower against the U.S. dollar in late trading Friday.
The Indonesian rupiah, Thai baht and the Philippines peso all languished.
Bank Indonesia Governor Sjahril Sabirin said Friday that the rupiah's recent weakness was directly linked to Brazil's financial turmoil, but stressed the government's commitment to supporting the currency.
Traders expressed skepticism over any rupiah strength in the short term. They said an increasingly risk-averse market isn't keen to take a position in rupiah because there are worries that Asia's most fragile economy will suffer the most from any Latin America contagion effect.
At 09:00 GMT (4:00 a.m. EST), the U.S. dollar was trading at Rp 8,900, well up from 8,650 late Thursday and, more importantly, up more than 10 percent from 7,935 last Friday.
The U.S. dollar had also been trading as high as Rp 9,200 during Friday's session, the highest level since Nov. 5 last year.
"U.S. dollar-rupiah is climbing, but you have to remember that the market is extremely thin (with) commercial orders and the odd flight-to-quality selling, but not much more," said a trader at a U.S. bank.
He added that Brazil's move to devalue its currency will probably be overshadowed by the end of Ramadhan next week. "The civil unrest that we'd been seeing in the later half of 1998 has quietened for the past month and there are worries that it will flare up again as we head toward the elections mid-year."
The U.S. dollar was also trading at 37.0900 baht, up from 36.8900 late Thursday and 36.3950 last Friday.
"People are expecting recovering economies such as Thailand to be adversely affected if Latin American problems extend across the Pacific," said a trader at a UK bank in Singapore.
Traders also suspected that the Bank of Thailand is in the market, buying U.S. dollars in its ongoing efforts to pay off massive forward commitments that were taken on when the currency crisis first hit in mid-1997.
On the Philippine Dealing System, the U.S. dollar was also trading at 38.785 pesos, up from 38.50 Thursday and 38.040 last Friday.
While the rupiah, peso and baht languish, the Singapore dollar has become a safe haven currency of sorts, traders said.
The U.S. dollar was trading at S$1.6815, down from S$1.6822 late Thursday, but well above S$1.6726 a week ago. The U.S. dollar had traded as low as S$1.6770 during today's session.
A stronger Singapore dollar is the last thing the republic needs, economists said.
Until the Brazilian real devaluation, the Singapore authorities had been directing the currency lower against the U.S. dollar, traders and economists said, in an attempt to ease recessionary pressures and the onset of deflation.
"Current Singapore dollar policy is interesting since it is a rational response to the region's problems," said Desmond Supple, an economist at Barclays Bank.
"In the face of a recession, domestic deflation and a banking system that requires low short rates, a weak currency is a logical policy response. Other countries are likely to pursue a similar path."
Taiwan is facing a similar problem as the currency climbs on the back of newfound yen strength against the U.S. dollar.
In late Asian trading, the U.S. dollar has fallen to 112.59 yen, down from 113.72 late Thursday but still well above 111.61 last Friday.
The U.S. currency was also trading at 32.218 New Taiwan dollars, down a touch from NT$32.255 Thursday but above NT$32.158 last Friday.
In North Asia, the U.S. dollar was trading at 1,183.7 won, down slightly from 1,186.3 Thursday but above 1,172 last Friday.