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.