SE Asian monies stronger against dollar

SE Asian monies stronger against dollar

SINGAPORE (Dow Jones): Southeast Asian currencies were generally stronger against the U.S. dollar in late, choppy trading Thursday, as the yen found new footing against the U.S. currency and the specter of central bank intervention weighed heavily on regional markets.

Traders in the Singapore dollar, Thai baht and yen markets were especially cognizant of central banks, as well as their U.S. dollar-buying agents, keeping close watch on the strength of the respective currencies.

As the U.S. dollar fell below 111 yen and headed toward a key resistance level at 110 yen, traders wondered aloud when Japan's central bank would make its presence felt.

Japanese politicians and exporters have been voicing concerns about the detrimental effects of a strong yen, leaving the market poised for a massive yen-selling exercise by the central bank.

"There are no real themes to be found in the yen, euro and U.S. dollar. Even people who are bearish on the yen aren't really taking positions because market liquidity is poor and currency movements have been too whippy," one currency strategist in a U.S. investment bank said.

As the yen has strengthened, the Singapore dollar has weakened against the U.S. dollar, leaving traders convinced that the republic's currency has now finally decoupled from the movement of the yen.

A currency strategist at a U.K. bank said the Singapore dollar's decoupling from the movement in the yen should become more pronounced, with the U.S. dollar moving to S$1.70 while falling to 105 yen at the same time.

Stephen Li Jen, Asian currency strategist for Morgan Stanley Dean Witter in Hong Kong, said a tug of war is taking place with the republic's currency.

"The Singapore dollar is being used as a funding currency for long positions in other regional currencies," he said, noting that the island's low interest rates justifies shorting the currency.

Climb

At 09:00 GMT (4 a.m. EST), the U.S. dollar was trading at S$1.6690, down from S$1.6775 late Wednesday, although the U.S. dollar did climb above S$1.68 in intraday trading.

The U.S. dollar was also trading at 36.2650 baht, down from 36.5950 late Wednesday.

Traders said profit-taking - and an appreciating yen - has played a factor in the baht's resurgence today, but noted that the Bank of Thailand's looming presence at or just above 36 baht is creating a firm floor for the U.S. dollar.

"The Bank of Thailand has more or less been buying U.S. dollars all the way down from 36.55 baht," said a trader at a Japanese bank in Singapore.

The U.S. dollar was also trading at 7,930 rupiah, down from 7,950 late Wednesday.

Traders and economists are loath to forecast what will happen in Indonesia, saying the razor's edge of political and social unrest could take the rupiah in either direction - and quickly.

Government elections in June and the presidential election in the fall could be catastrophic or well received, he said.

"There is no reason why the U.S. dollar could not collapse to Rp 4,000 if the non-economic risk is taken away," Li said, conceding that the balance of risk, especially for the June elections, is probably on the downside for the rupiah.

Another concern could be the plethora of multilateral U.S. dollar disbursements made in 1998, which should be 90 percent dispersed by March 31, economists said.

"The appreciation of the rupiah could be mostly explained by the sales of foreign exchange loans to the central bank, but once that variable is taken away, the risk will become higher for the rupiah," said an economist at a U.S. bank in Singapore.

On the Philippine Dealing System, the U.S. dollar was trading at 38.36 pesos, up from 38.24 late Wednesday. Traders said late afternoon profit taking pushed the U.S dollar up from intraday lows of 38.19.

In North Asia, the South Korean won hit its highest point since November 1997, with the U.S. dollar trading at 1,151.0 won, down from 1,158.6 Wednesday.

The dollar was also lower in Taiwan, fetching NT$32.170 late in trading, compared with NT$32.186 late Wednesday.