Thai baht down to near 6-month low as swaps drop

Thai baht down to near 6-month low as swaps drop

SINGAPORE (Dow Jones): A steep fall in the value of the Thai baht enlivened an otherwise lackluster day of trading in Southeast Asian currency markets Friday.

Fresh dollar buying from U.S. players in the offshore market pushed the U.S. currency higher against the baht right from the start of Asian trading. At one point in the Asian morning the U.S. dollar was driven as high as 38 baht, its strongest level in nearly six months.

It later fell back to end the day slightly below the 38 baht mark. But with onshore Thai markets closed for the Songkran Festival on Monday through Wednesday next week, many dealers expect offshore players to propel the U.S. currency higher still in the near term.

The immediate trigger for the U.S. dollar's rise Friday was a collapse in the rates on U.S. dollar/baht swaps in the offshore markets.

Late Friday in Asia the U.S. currency was quoted at 37.9950 baht, up from 37.7650 baht towards the end of Thursday's session.

And with Thailand on holiday for most of next week, there will be little opposition to stop the dollar going higher still, as the onshore market participants whose offers have capped the U.S. currency's potential gains in recent sessions will be absent from the market.

Activity in other regional markets was quieter on Friday. The Singapore dollar ended little changed on the session as traders continued to look to moves in the U.S. dollar/yen exchange rate for their trading cues.

Remarks by Singapore's deputy prime minister Tony Tan, who told the Asia-Pacific Council of the American Chamber of Commerce that Singapore's economic growth is likely to exceed the government's official forecast of 1 percent this year, had little impact on the market.

Throughout the day, the U.S. dollar remained locked in a S$1.7300 to S$1.7350 range, ending interbank trading at S$1.7335, little changed from S$1.7327 the previous day.

Trading activity in the Indonesian rupiah was "dead" according to one dealer at a U.S. bank in Singapore. The rupiah was quoted at Rp 8,728 in late trading in Jakarta, down, down a fraction from Rp 8,760 on Thursday.

With some U.S. dollar buying interest seen below Rp 8,700, and Bank Indonesia believed to be selling the U.S. currency above Rp 8,800, few dealers expect the exchange rate to stray beyond the same Rp 100 range over the coming week.

With markets in Manila closed for a holiday on Friday, there was no trading in the Philippine peso.

Despite healthy inflows of foreign investment funds, the South Korean won ended flat on Friday, as U.S. dollar buying by the state-run Export-Import Bank continued to absorb the supply.

Traders widely assumed that the government was directing the dollar buying in order to hold down the won and preserve Korea's export competitiveness.

At the close of local trading the U.S. dollar was at 1,223.10 won, unchanged from the previous day.

Foreign fund inflows were also an important influence on the new Taiwan dollar on Friday, lifting the local currency despite central bank activity to stabilize the market.

At the close the U.S. dollar was at NT$33.0995, compared with NT$33.118 the previous day.