SE Asian monies surrender gains as stocks slip back

SE Asian monies surrender gains as stocks slip back

SINGAPORE (Dow Jones): A sharp correction in Asian stock
markets on Thursday cut away some of the gains made recently by
regional currencies.

In Southeast Asia, the Singapore dollar and the Thai baht both
slipped back, although the Philippine peso firmed slightly.
In North Asia the new Taiwan dollar lost ground, but the South
Korean won held its own despite a 4.7 percent drop in the local
stock market index, climbing to its highest level against the
U.S. dollar in almost 12 weeks.

With Japanese financial markets closed for a holiday, and the
yen's exchange rate largely static through Asian hours, regional
currency dealers took their trading cues from falling equity
prices.

Of the regional currencies, the Singapore dollar was the most
sorely hit.

From an early intraday low of S$1.6925, the U.S. currency
traded steadily higher throughout the session, finishing Asian
hours at S$1.7003, up from S$1.6962 late on Thursday.

Despite the sell-off, many market participants remained
stoical, saying that Thursday's corrections in stock and currency
markets were just a temporary setback driven by profit-taking,
and that underlying sentiment towards the region remains
relatively positive.

In a couple of days, this profit-taking will have been
completed and we will see a resumption of the up-move in equity
markets. Interest rates will continue to come off and currencies
will continue to strengthen. There will be no substantial
depreciation," predicted the head of foreign exchange at a U.S.
bank in Singapore.

"Overall, the mood is still very temperate," concurred Thio
Chin Loo, foreign-exchange market strategist at Banque Paribas in
Singapore. Although some traders were caught short by the U.S.
dollar's rally against the Singapore dollar, for the most part
activity in regional foreign-exchange markets remained muted, she
said.

Baht dealers agreed, reporting only modest trading volumes in
the Thai currency.

After falling through expected support at 37.40 baht to hit an
early low of 37.37 baht, the U.S. dollar later recovered
somewhat, as the regional stock market correction gathered
momentum. By the end of Asian interbank trading, the U.S. dollar
had clawed its way back up to 37.4325 baht, just a fraction below
37.4350 baht late Wednesday.

Equity-market jitters failed to make a significant impact on
the Philippine peso, however. Although the local stock index
slipped by over 1 percent, the peso remained firm, with the U.S.
dollar closing at 38.020 pesos, down a touch from 38.030 pesos
the previous day.

The Indonesian rupiah also proved resistant to regional
profit-taking, as favorable yields continued to attract a trickle
of foreign funds to Jakarta.

Late in Asian trading, the U.S. dollar was quoted at 8,335
rupiah, down a little from Rp 8,360 late Wednesday.

The impact in North Asia was far more pronounced. In Taipei,
the New Taiwan dollar dropped sharply in response to a 2.8
percent fall in the local stock market, as equity investors sold
stock to book profits from the recent equity rally.

Currency traders wasted little time in liquidating long
positions in the local currency in response to the news that
foreign investors sold a net NT$495 million of Taiwanese stocks
Wednesday.

The outflow gathered pace Thursday, with foreign investors
selling a net NT$1.54 billion of Taiwanese equities, prompting
the island's central bank to enter the market, selling U.S.
dollars to arrest the local currency's fall.

By the close of local trading, the U.S. dollar was quoted at
NT$32.689, down from its earlier high of NT$32.725, but up from
NT$32.681 at Wednesday's close.

Despite a weighty 4.7 percent drop in the Seoul stock market
index, the Korean won actually rose, to end the day at its
highest level since February 8, buoyed, traders said, by month-
end dollar sales from Korean exporters.

At the close, the U.S. currency was quoted at 1,174.60 won,
down from 1,175.50 won the day before.