Singapore dollar gains spotlight, others mixed
Singapore dollar gains spotlight, others mixed
SINGAPORE (Dow Jones): Southeast Asian currencies are mostly mixed against the U.S. dollar, but the Singapore dollar grabbed the spotlight as volumes in other currencies dried up Thursday, said market players.
The fact that the Singapore dollar was being used as a proxy for other Southeast Asian currencies and rumors related to the currency's link with the Brunei dollar caused a rally in the U.S. dollar versus the Singapore dollar.
When the U.S. dollar hit its intraday high of S$1.7780 Thursday, it had risen 4.3 percent since Tuesday's close.
In other regional currencies, the dollar was mostly range- bound against the baht and it climbed marginally higher against the Philippine peso.
Market players bought the U.S. dollar against the Singapore dollar because of the negative news coming out of Malaysia and Indonesia. Traders used the Singapore dollar as a proxy for the ringgit because the Singapore dollar is the most liquid, tradable currency in Southeast Asia.
"After all, there is no other easily tradable currencies in Southeast Asia now," said a regional currencies dealer at a major German bank here.
In addition, market players circulated a rumor that the Singapore dollar was about to be delinked to the Brunei dollar, giving the U.S. dollar a bit of a jolt, they added.
Currency analysts said the rumor stemmed from a question that is scheduled to be raised by a back bencher in the Singapore Parliament midday Friday. The question is periodically raised by members of Parliament.
The rumor was subsequently denied by the Monetary Authority of Singapore.
"People were just spreading an old rumor and trying to make some money out of it," said a currency analyst. "The Brunei dollar rumor just drove the dollar-Singapore higher," said a trader at a French bank here.
In late trade, the U.S. dollar is at S$1.7609, down from S$1.7676 in early in Asian trading but up sharply from S$1.7470 late Wednesday.
The Philippine peso also closed lower against the U.S. dollar Thursday, weighed down by strong corporate demand for the dollar, traders said.
"Sentiment toward regional currencies is still predominantly negative" and that damped sentiment spilled over into the Philippine peso, said a trader with a foreign bank said, noting that developments in Malaysia are only the latest in a string of negative developments in the region.
Traders said the dismissal late Wednesday of Malaysian Deputy Prime Minister and Finance Minister Anwar Ibrahim triggered renewed dollar buying on the Philippine Dealing System and other regional markets.
At the close, the dollar averaged 43.506 pesos on the Philippine Dealing System, up 43.9 centavos from Wednesday's average of 43.067 pesos. The dollar was last traded at 43.430 pesos.
Similarly, the Indonesian rupiah ended slightly lower largely as a result of concerns of spreading social unrest in the country, said onshore traders. Volumes were extremely low, said traders.
In late offshore trading, the dollar is at Rp 10,788, up from Rp 10,600 late Wednesday.
Bucking the trend, albeit marginally, was the Thai baht, which rose against the dollar. In a late trade, the dollar is quoted at 40.80 baht, down from 40.90 baht late Wednesday.
"There were very small transactions going on in the baht in Bangkok today. The dollar was basically caught between 40.79 baht and 40.95 baht for most of Thursday.
In North Asia, the Hong Kong dollar is up marginally late Thursday despite interest rates having fallen to extremely low levels in the past few days.
The currency is trading at HK$7.7450 to the dollar, lower than HK$7.7495 late Wednesday.
Forward premiums remain at low levels in line with money market rates, as investors unwind local currency hedges because of a turnaround on the home stock market. Some investors are still hedging in the three-month to six-month maturities, indicating slight market bearishness longer-term, said traders.
Dealers said there isn't much interest in the Hong Kong dollar and the forward markets because the lower interest rates make it less attractive to buy the Hong Kong dollar for arbitrage profits. In fact, the overnight interbank rate of 4.0 percent is below the comparable U.S. dollar rate.