SE Asian monies slip lower on year-end dollar demand

SE Asian monies slip lower on year-end dollar demand

SINGAPORE (Dow Jones): Southeast Asian currencies ended Asian
trading hours on Monday lower against the U.S. dollar. But with
many market participants away from their desks during the holiday
season, few dealers were prepared to read any significance into
the drop.

"There is no real direction to the market. Everyone is just
waiting for the New Year. There is no interest in opening new
positions until then," said the head of foreign exchange at a
U.S. bank in Singapore, explaining that by now many banks have
closed their regional currency trading books for the year.

Despite the general lack of interest, regional foreign
exchange markets did see some price movement. In both Thailand
and the Philippines negative sentiment over increasing levels of
non-performing loans compounded the effect of normal end-of-year
corporate demand for U.S. dollars to drive the local currency
lower.

Elsewhere in the region, the Indonesian rupiah eased a
fraction, while the South Korean won and the new Taiwan dollar
also ended the day down against the U.S. currency.

Only the Singapore dollar bucked the regional trend, closing
Asian hours higher in parallel with the yen, which recovered from
early losses against the U.S. dollar in afternoon trading.

Activity remained extremely subdued, however. What order flow
there was in regional markets was associated primarily with
corporate demand for U.S. dollars to meet debt payments due at
the end of the year, according to traders.

Given the market's seasonal illiquidity, a steady trickle of
U.S. dollar bids proved sufficient to push the Thai baht to its
lowest level in over a month.

By late in Asian trading, the U.S. dollar had risen to 36.96
baht, up from 36.35 baht late on Friday in domestic trading. Late
on Thursday, the previous trading day for the offshore interbank
market, the U.S. dollar was at 36.48 baht.

The announcement by the Bank of Thailand that non-performing
loans in the domestic banking sector had climbed to 40.5 percent
of the total outstanding by the end of October did nothing to
improve sentiment towards the baht.

Although the proportion was in line with many analysts
expectations, and better than some, it served to emphasize the
problems the Thai government faces.

The point was further driven home by the release of November's
trade figures. These showed a 6.7 percent year-on-year fall in
exports, although a corresponding 14.9 percent fall in imports
served to maintain Thailand's billion dollar trade surplus.

In Manila year-end dollar buying also drove the Philippine
peso lower against the U.S. currency. There, too, attention was
drawn to the problem of non-performing loans when the Asian
Development Bank said the Philippines must guard against the
"real possibility" of corporate loan defaults posing difficulties
for the country's banking system.

At the close of domestic trading, the U.S. dollar was quoted
at 39.145 peso, compared with 38.950 peso on Thursday, the
previous trading day.

Elsewhere the rupiah ended down, on what traders said was
dollar-buying by Indonesian corporations. Late in Asia, the U.S.
currency was quoted at 8,000, up from 7,862 late Thursday.

In North Asia, both the new Taiwan dollar and the won ended
domestic trading lower. At Taipei's close the U.S. dollar was at
NT$32.259, up from NT$32.243 the previous day. In Seoul, the U.S.
currency ended at 1,209.20 won, compared with 1,207.30 won on
Thursday.

The Singapore dollar, however, ended Asian trading higher,
after the U.S. currency fell back from an early high of S$1.6615
to finish interbank trading at S$1.6587, down a touch from
S$1.6595 at Thursday's close.