Southeast Asia currencies mostly fall

Southeast Asia currencies mostly fall

SINGAPORE (Dow Jones): Southeast Asia's foreign exchange
markets remained slumped in end-of-year lethargy throughout Asian
trading on Tuesday.

Of the Southeast Asian currencies, only the Philippine peso
showed signs of animation, as an influx of foreign funds lifted
the local currency, once again forcing the U.S. dollar below the
psychologically important 39.00 level peso.

Activity in North Asian markets was brisker. In Taipei the New
Taiwan dollar edged higher, building on its recent gains, as the
central bank stepped into the market, both buying and selling
U.S. dollars in an attempt to moderate market volatility
following Monday's interest rate cuts.

In Seoul, the South Korean won retreated from the four-month
high it set on Monday, as market participants took fright at the
prospect of central bank intervention to check the local
currency's rapid appreciation.

But, for the most part, trading was extremely subdued.

"The market is very, very quiet - exceptionally quiet," said
Tony King, director of foreign exchange at Barclays Capital in
Singapore.

The head of foreign exchange at one Japanese bank in
Singapore, when called by Dow Jones Newswires, was said by a
subordinate to be "sleeping."

With little fresh information to drive them one way or the
other, the Thai baht and Singapore dollar broadly shadowed the
yen, easing in early Asian trading before recouping some of their
losses later in the day.

Late in Asian trading, the U.S. dollar was quoted at S$1.6592,
up from S$1.6577 late Monday.

Against the baht, the U.S. currency was at 35.9650 baht,
little different from 36.9600 a day ago.

The rupiah, too, was little changed on the day, with the U.S.
dollar ending interbank trading in Singapore at 7,425, down just
a touch from 7,535 late Monday.

Against the Philippine peso, however, the U.S. dollar ended
lower, as a combination of fund inflows from foreign direct
investors and remittances from expatriate Filipinos buoyed the
local currency.

In North Asia, the New Taiwan dollar ended higher after the
market reacted positively to the news late Monday that the
Central Bank of China, the country's central bank, cut its
benchmark rediscount rate 25 basis points to 4.75 percent.

Against the won, the U.S. currency ended slightly higher, as
market participants bought dollars to cover their positions,
nervous that the Bank of Korea might intervene in the market to
hold down the won after it hit a four-month high on Monday.

At the close of domestic trading in Seoul, the U.S. dollar was
quoted at 1,217 won, up from 1,208 Monday.

Although regional currencies for the most part traded sideways
in the spot foreign exchange market, the yields on Asian
currencies implied by swap and non-deliverable rates continued to
fall on Tuesday.

"The spread over U.S. dollar yields has almost disappeared
across the board," said Daniel Lian, head of Asian markets
research at ANZ Investment Bank in Singapore. "There is a clear
market consensus that the risk of Asian currencies depreciating
is low."

With the yield implied by three-month U.S. dollar/baht swap
rates falling to under 6 percent from 8 percent a month ago, and
Hong Kong dollar yields at 5.9 percent, down from 6.5 percent,
the market is barely factoring any risk premium at all into Asian
currencies, explained Lian.