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.