Strong economic outlook pushes won to 5-month high
Strong economic outlook pushes won to 5-month high
HONG KONG (Dow Jones): A rally in the yen combined with a
strong fundamental economic outlook to push the South Korean won
to a five-month high against the U.S. dollar during Asian trading
hours Wednesday.
A similar story was credited with lifting the New Taiwan
dollar to its strongest level in three and a half months, but in
South East Asia, regional currencies slipped back as caution
tempered the enthusiasm seen Tuesday.
The immediate cause of Wednesday's rise in the won, according
to traders, was the overnight rally in the yen. After it fell
below 120 yen in New York trading Tuesday, the U.S. dollar opened
down steeply against the won in Asia Wednesday, dropping to an
intraday low of 1,161 won, its weakest level since Jan. 8.
But although the yen may have helped push the won higher in
the short term, analysts said Korea's strong economic outlook is
the real engine driving the local currency's rally.
"I think the won will strengthen further. The fundamentals are
powerful - the Korean economy is leading the regional recovery,
the inflation outlook is benign and the balance of payments is
strong," said David Simmonds, Asian currency strategist at
Citibank in Singapore.
"The market is well on its way to meeting our initial
expectations of 1,150 won, and there is a good possibility that
the dollar will go lower than that," he added.
Other observers agreed that the won is likely to strengthen
further, noting that state-owned banks appear to have been
intervening less in the market over recent days.
"There is a steady upward pressure on the won. In the past it
has been countered by dollar-buying from the state-owned banks,
but it seems they are stepping back from the plate now," said
Marshall Gittler, senior foreign-exchange analyst at Bank of
America in Hong Kong.
By the close of trading Wednesday, the U.S. dollar had dropped
to 1,165.50 won, up a touch from its earlier low, but down 0.5
percent from Tuesday's closing level of 1,172.50 won.
The New Taiwan dollar also hit a long-term high Wednesday,
lifted by news of buoyant semiconductor sales and a growing
belief that the central bank may be prepared to tolerate a
stronger currency.
Wednesday's announcement by Taiwan Semiconductor Manufacturing
Co. of record sales in May, up 39 percent from a year earlier,
reinforced positive sentiment following the government's release
of data Tuesday showing that Taiwan's trade surplus hit its
highest level since December 1997 during May.
At the close of local dealing, the U.S. currency was quoted at
NT$32.528, up a touch from its earlier three-and-a-half-month low
at NT$32.466, but still down from NT$32.579 at Tuesday's close.
Despite the strength of the yen, currencies in Southeast Asia
largely failed to extend Tuesday's gains, as the euphoria that
followed Monday's elections in Indonesia subsided into cautious
optimism.
The U.S. currency was also higher against the Thai baht. Late
in Asian trading, the U.S. dollar was quoted at 36.9650 baht, up
a touch from 36.9400 baht late Tuesday.
The Singapore dollar managed to hang onto some of its gains,
however. After falling below S$1.7100 in early dealing, in line
with its drop against the yen, the U.S. dollar clawed back some
of its losses, to finish the Asian session at S$1.7145, down
slightly from S$1.7165.
In Manila, the Philippine peso also finished a little
stronger, with the U.S. dollar ending the local session at 36.820
pesos, compared with 36.845 pesos the day before.