Taiwan dollar loses ground but other Asian markets quiet
Taiwan dollar loses ground but other Asian markets quiet
HONG KONG (Dow Jones): The New Taiwan dollar lost ground Tuesday as investors reacted nervously to Chinese saber rattling, in what was otherwise a directionless day for Asian foreign exchange markets.
Among other regional currencies, the South Korean won and Thai baht edged higher, but the Singapore dollar fell back. The Indonesian rupiah finished slightly weaker, and the Philippine market was closed due to inclement weather.
China's announcement Monday that it had test-fired an intercontinental missile raised fresh fears among investors in Taiwan.
Nerves had largely calmed following a sharp sell-off last month after Taiwanese President Lee Teng-hui infuriated China by attempting to place relations between the island and the mainland on a "state-to-state" footing. China regards Taiwan as a wayward province.
Foreign investors reacted to the mainland's latest military posturing by selling down the Taiwanese currency from the start of trading, pushing the U.S. dollar to an intraday high of NT$32.215, compared with NT$32.143 at Monday's close.
The move, although relatively modest, prompted Shea Jia-dong, a deputy governor of the central bank, to threaten central bank punishment against those he termed as speculators.
Offshore traders, however, denied there was any appreciable speculation taking place in the New Taiwan dollar, whether in the onshore spot market or the offshore market in non-deliverable forwards.
"We have seen some foreign investors withdrawing from the Taiwanese stock market, but there is not much active speculation going on," said Frank Gong, a Hong Kong-based foreign exchange analyst with Bank of America.
Gong's words were echoed by non-deliverable forward, or NDF, brokers, who said that although some two-way interest was seen Tuesday, volumes in the offshore market remained poor.
The one-month U.S. dollar/New Taiwan dollar NDF ended Tuesday's session unchanged from Monday, at par with the spot rate.
Onshore, the U.S. dollar closed at NT$32.169, up from Monday's close, but well down from its intraday high following intervention to support the local currency by the central bank.
Dealers said the central bank's threats were preemptive in nature, and were aimed at deterring potential speculative short- selling of the new Taiwan dollar, rather than putting a stop to any current activity.
"With the local stock market down 15 percent, the central bank does not want to risk a sell-off in the currency too," said one Singapore-based NDF broker.
In Taipei, the central bank was at pains to stress that Taiwan's economic fundamentals remain sound, with Shea forecasting GDP growth of 5.3% this year - a figure analysts generally accept as feasible.
Elsewhere, the South Korean won edged higher as dealers attempted to front-run capital flows derived from Hanvit Bank's forthcoming $1 billion GDR issue.
At the Seoul close, the U.S. dollar was at 1,198.30 won, down from 1,200.00 won the previous day.
In Southeast Asia, the Singapore dollar ended slightly lower after players, who on Monday went long the local currency in an attempt to ride the unwinding of cross-currency carry trades, sold the Singapore dollar to cover their positions.
Late in Asia, the U.S. dollar was quoted at S$1.6835, up from S$1.6799 the day before.
The Thai baht climbed slightly, benefiting from the opposite leg of the same play. Toward the local close, the U.S. dollar was quoted at 37.2950 baht, down from 37.3250 baht late Monday.
Against the Indonesian rupiah, the U.S. currency ended Asian hours at Rp 6,887, up from Rp 6,859 the day before, but well within the currency's recent Rp 6,800 to Rp 6,900 range as the market ignored President B.J. Habibie's endorsement of the result of June's parliamentary election.
In London, the yen fell sharply on Tuesday after a top Japanese official had voiced concern about the strength of the currency, and the euro and sterling continued to benefit from weakness of the dollar.
The euro was being traded at 1.0660 dollars from 1.0665, 123.18 yen (121.85), 0.6595 pounds (0.6609), 1.5985 Swiss francs (1.5973).
The dollar was being traded at 115.55 yen (114.25), 1.4997 Swiss francs (1.4975).
Sterling was being traded at 1.6157 dollars (1.6135), 186.72 yen (184.60) and 2.4230 Swiss francs (2.4190).