Southeast Asian currencies rise further as yen surges
Southeast Asian currencies rise further as yen surges
SINGAPORE (Dow Jones): Southeast Asian currencies extended
their recent bull-run, rising further against the U.S. dollar
during Asian trading late on Tuesday.
North Asian currencies also rose, but most analysts remained
extremely cautious. Despite a flurry of positive developments
around Asia, market optimism in the regional currencies may be
misplaced, they warned.
"The market is certainly more bullish towards the regionals,
but I am not sure how solid that sentiment is," said Andrew Fung,
a treasury economist at Standard Chartered Bank in Singapore.
Fung believes the rally in regional currencies is being driven
almost entirely by the rise of the yen ahead of the end of
Japan's fiscal year in two weeks. It is a belief echoed by other
analysts.
"What we have seen over the last week or so are positive
developments on the domestic front around the region, coupled
with a more benign environment for the yen," said Sun Bae Kim, an
economist at Goldman Sachs in Hong Kong.
The Indonesia rupiah ended the day slightly lower against the
dollar, with the government's new letter of intent with the
International Monetary Fund failing to lift the currency.
The rupiah was quoted at Rp 8,830 rupiah to Rp 8,855 in the
spot market at the end of Asian trade Tuesday, below Rp 8,775
traded late Monday.
"There was no real reaction to the letter of intent," said a
dealer at a foreign bank in Jakarta, noting that the market had
been expecting the agreement with the IMF following the
government's banking announcements over the weekend. "It was
already factored in," he said.
In a copy of the letter of intent released by the government,
Indonesia stuck to its outlook of a "modest recovery" in the
second half of the year, with flat growth in the first half
leading up to landmark multiparty elections in June.
The government said it would implement its foreign exchange
monitoring system by June and again pledged to maintain an open
capital account.
Comments by central bank Governor Sjahril Sabirin hinting that
the bank would push interest rates lower in the wake of the bank
restructuring announcements, left market participants looking
towards possible lower rates at Wednesday's auction of one month
central bank notes.
"Now they can ease a bit, maybe by 200 basis points," said the
dealer at a foreign bank.
Interest rates on one month Sertifikat Bank Indonesia rates
have risen steadily since the beginning of the year to help prop
up the rupiah.
Dealers expect the rupiah to trade in a range of Rp 8,800 to
Rp 8,900 Wednesday.
Among other regional currencies the baht strengthened
moderately on limited buying from offshore players. The U.S.
dollar, however, remains well supported above the 37.00 baht
level.
The Singapore dollar also ended Asian trading higher than the
previous day, although well down from its intraday highs in a
move partly attributed to sales of the local currency against the
baht.
Late in Asia the U.S. dollar was at S$1.7220, down from
S$1.7236 on Monday.
The Philippine peso rose too, buoyed by a combination of the
yen's strength and the release of figures showing an eighth
successive monthly trade surplus.
At the close of trading on the Philippine Dealing System, the
U.S. dollar was at 38.820 pesos, down from 38.875 pesos the day
before.
In North Asia, the announcement that the Bank of Korea's
foreign reserves had risen to a record high of US$56.18 billion
as of Monday helped to support the won. At the domestic close,
the U.S. dollar had eased to 1,227 won, compared with 1,231 won
on Monday.
In Taipei, central bank intervention steered the New Taiwan
dollar gently higher. At the end of trading, the U.S. dollar was
at NT$33.094, down fractionally from NT$33.097 the previous day.