Southeast Asian currencies drift higher as yen surges

Southeast Asian currencies drift higher as yen surges

SINGAPORE (Dow Jones): The U.S. dollar's fall against the yen in thin Asian trading late on Friday finally pushed sluggish Southeast Asian currencies higher, traders said.

"The U.S. raids on Iraqi are a non-factor now. Only the lack of liquidity is managing to drive the market. One or two bank orders can quickly drive the U.S. dollar higher or lower," said one trader at a U.S. bank in Singapore.

That happened late in the Asian session when the yen suddenly spiked, quickly climbing as high as 114.70 yen against the U.S. dollar from around 116 yen.

The U.S. dollar's sudden drop against the yen roiled regional currencies, which had been moving sideways during the session, although there was a noticeable lag in response, traders said.

In a late trading, the U.S. dollar was trading at S$1.6485, down a touch from S$1.6493 late Thursday and from S$1.6490 last Friday.

Traders said the correlation between the Singapore dollar and the yen has waned somewhat during the past month. While the U.S. dollar falls against yen, the U.S. currency has gradually appreciated against the Singapore dollar. " The Monetary Authority of Singapore has been active in the market, pushing interbank rates down, asking the local banks to buy U.S. dollars and generally preventing the U.S. dollar from falling below S$1.60, where it should be if it was tracking the yen," said the head of foreign exchange at a U.S. bank in Singapore.

Kate O'Donaghue, an economist at Barclays Capital in Singapore, said the Singapore dollar should be the MAS's policy weapon of choice to ensure that Singapore's current recession is a soft one.

While Singapore languishes, Thailand is looking to get back on its feet after this week's dismal Financial Restructuring Agency auction of $10.5 billion in seized assets from 56 defunct financial institutions.

Only 39 of the 45 tranches were bid for by domestic and foreign buyers on Tuesday. By Friday, the FRA had accepted the bidding prices for just nine tranches. The FRA is now trying to negotiate better prices with the other potential buyers of the 30 remaining tranches -- buyers who had submitted bids ranging from eight cents to $0.30 on the dollar.

"The FRA is in a quandary. They can't be seen to be disposing assets at knock-down prices to foreigners, who will then go away and make big profits. On the other hand, they want to dispose of the assets," O'Donoghue said.

The peso -- more so than other regional currencies -- seems to get blown around more by events in the region," said a trader at a U.S. bank. "If the baht weakens, so does the peso. In the short term, the movement isn't really related to country fundamentals."

In North Asia, the U.S. dollar was trading at 32.274 New Taiwan dollars, almost unchanged from NT$32.272 late Thursday and NT$32.284 last Friday. The U.S. dollar was also trading at 1207.9 won, down from 1,209.3 won Thursday but unchanged from 1,207 last Friday.