Southeast Asian currencies perk up

Southeast Asian currencies perk up

SINGAPORE (Dow Jones): Southeast Asian currencies recovered from morning lows in afternoon trading yesterday as the Japanese yen touched, but failed to break through, the key psychological level of 142 to the U.S. dollar.

"People are worrying about possible independent action from Japan after the lack of action from the Group of Seven deputy finance minister's meeting Wednesday in Paris," said Daniel Lian, the head of Asian markets research for ANZ Investment Bank in Singapore.

Some market players had been hoping that the G-7 meeting would result in at least a statement from the deputy ministers expressing concern over the weak yen, which has fallen more than 2 percent in the past two weeks.

Lian said that with the dollar capped at 142 yen, regional currencies had little impetus to fall further.

"In the near term everything is very much dependent on the dollar/yen, and if the spot rate is not moving, flow traders have to take profits, because it is very expensive to fund short positions in these (Southeast Asian) currencies," Lian said.

Daragh Maher, an economist at ING Barings in Singapore, said the market was merely taking a breather today.

"We've seen regional currencies weaken substantially in a short period of time, and everybody is reassessing the merits of being short," he said.

Maragh cautions, however: "I wouldn't say we've turned the corner. Aside from the weak yen dragging Southeast Asian currencies lower, a lot of attention is on the yen's implications for the Chinese yuan and the Hong Kong dollar."

At 11.20 GMT the U.S. dollar was quoted at 3.9752 Malaysian ringgit, down from 3.9800 late Wednesday in Asia, and much below its intraday high of 4.0500.

In comparison, the Singapore dollar fell yesterday. ANZ's Lian chalked up the Singapore currency's weakness to its low interest rates - relative to the rest of Southeast Asia - and warned that a rumor in the market had it that several U.S. names were taking advantage of the low rates to take new short positions on the Singapore dollar.

At 11.20 GMT, the U.S. dollar was quoted at 1.7315 Singapore dollar, up from 1.7260 late Wednesday in Asian trading.

The Indonesian rupiah fell after news hit the market that Bank Indonesia, as part of a debt agreement reached between Indonesian creditors and international banks, ordered Indonesian banks to pay their interbank debt and trade finance arrears by yesterday.

In Thailand, comments by international rating agency Moody's Investors Service that Thai banks stand to lose up to US$30 billion, or one-third of the book value of all outstanding loans, failed to move the market much.

The following is a table of key Southeast Asian regional currency foreign exchange rates and implied interest rates. The spot rates are those quoted at the close of the Singapore interbank market around 09.00 GMT.

The accompanying implied interest rates are derived from the corresponding swap offer rates, also as quoted in Singapore. For currencies that are non-convertible on the capital account, implied interest rates are derived from non-deliverable forward offer rates.