Southeast Asian currencies strengthen

Southeast Asian currencies strengthen

SINGAPORE (Dow Jones): Just as the rally in Southeast Asian currencies was appearing to flag, the Philippine peso took up the baton, strengthening sharply to hit a six-month high during Asian trading on Wednesday.

In what was otherwise a lackluster day for the regional foreign exchange markets, healthy capital inflows lifted the Philippine peso (PHP) to its highest level in six months, as the U.S. dollar was forced below the psychologically important 39.00 peso level for the first time since June 4.

Although the U.S. currency clawed back some of its losses late in the day, to close a fraction above 40.00 peso, most observers confidently predicted further gains for the local currency in the run-up to the end of the year.

As trading in the local market ended late Wednesday, the U.S. dollar was quoted at 39.020 peso, down from 39.355 peso at the previous close.

Elsewhere in Southeast Asia, regional currencies lacked the peso's buoyancy. The Thai baht, so frequently the star of recent sessions, crabbed sideways in a tight trading range throughout the Asian hours.

While most investors and traders retain a positive outlook for the baht, many are nervous of buying into the rally at this late stage. They are afraid that the Bank of Thailand will intervene in the market should the dollar fall below 36.00 baht, selling down the baht to take the pressure off local exporters.

Although Bank of Thailand Governor Chatu Mongol Sonakul declared on Wednesday that the central bank wasn't attempting to prop up the U.S. currency at the 36.00 baht level, he admitted that the bank had been buying dollars in the market. The purchases, he said, were aimed at acquiring dollars to settle the central bank's outstanding forward contracts, which amounted to US$7.7 billion late last month.

Late in Asian trading Wednesday, the U.S. dollar was quoted at 36.0300 baht, down slightly from 36.0650 baht late the previous day.

In general, however, most offshore investors are relatively bullish on the baht. Many are predicting further gains in December, with the Financial Sector Restructuring Authority's planned Dec. 15 auction of $1 billion worth of defunct financial companies assets attracting considerable foreign interest.

Despite the widespread optimism, serious concerns cloud the baht's outlook. Many analysts point to the failure of Thailand's sixth letter of intent to the IMF, signed on Tuesday, to incorporate an expected commitment to introduce a comprehensive bankruptcy law. The success of Thailand's opposition parties in blocking the measure has severely dented investor confidence, they say.

Among other regional currencies, the Singapore dollar finished Asian trading hours lower, after aggressive U.S. dollar buying from local banks wiped out the local currency's overnight gains in early trading.

Like other central banks around the region, the Monetary Authority of Singapore is widely believed to be intervening in the foreign exchange market to safeguard domestic export competitiveness by moderating any tendency the local currency may have to appreciate.

Late Wednesday in Asia, the U.S. dollar was quoted at S$1.6506, up from S$1.6471 late Tuesday.

In North Asian markets, the U.S. dollar slipped moderately, in parallel with a fall against the yen.

Against the new Taiwan dollar, the U.S. currency ended domestic trading at NT$32.420, down from NT$32.438 the previous day. Against the South Korean won, the U.S. dollar ended at 1,238 won, down from 1,245 won at Tuesday's close.