Thai baht retreats as other SE Asian monies strengthen

Thai baht retreats as other SE Asian monies strengthen

SINGAPORE (Dow Jones): Southeast Asian currencies returned a
mixed performance against the U.S. dollar during Asian trading
hours on Monday.

The Singapore dollar and the Philippine peso both advanced,
but the Thai baht slipped back.

In contrast, North Asian currencies were uniformly buoyant.

Rising stock markets and a stronger yen combined to lift both
the South Korean won and the new Taiwan dollar, which climbed to
a fresh nine-week high in intraday trading.

While the slight appreciation of the Singapore dollar and the
Philippine peso were broadly in line with market expectations,
Monday's slide in the Thai baht confounded dealers.

From the start of trading, steady buying pressure in the
offshore market lifted the U.S. dollar against the baht. By the
close of Asian dealing, the U.S. dollar had risen to trade at
37.7150 baht, up from 37.6150 baht late on Friday.

One trader at a U.S. bank in Singapore linked the baht's fall
to a purchase order for $70 million executed on behalf of an
offshore player he said was covering a maturing short forward
position against the U.S. currency.

In contrast, the Singapore dollar and the Philippine peso both
edged higher against the U.S. currency.

Dealers described interest in trading the Singapore dollar as
muted. With heavy resistance expected should the U.S. dollar push
up towards S$1.7150, and good support encountered at S$1.7050, as
traders took profits nervous of possible intervention around
S$1.7000, few market participants were prepared to do anything
other than play the prevailing range.

Late in Asia, the U.S. dollar was quoted at S$1.7060, down
slightly from S$1.7099 towards the end of Friday's session.

The Philippine peso, meanwhile, continued to press higher
against the U.S. currency. Dealers reported continued inflows of
foreign funds into the stock market after the Central Bank of the
Philippines early Monday shaved its overnight borrowing and
lending rates by 50 basis points, the 11th cut so far this year.

At the close of domestic trading, the U.S. dollar was quoted
at 37.995 pesos, down from 38.020 pesos at the end of Friday's
session.

The Indonesian rupiah saw little price action, with the U.S.
dollar ending Asian hours at Rp 8,612, up from Rp 8,570 late on
Friday.

In North Asia, strong inflows of foreign investment funds
continued to lift the South Korean won and the new Taiwan dollar.

Although the current rally has carried both the won and the
new Taiwan dollar to levels that the local monetary authorities
in Seoul and Taipei clearly find uncomfortable, many market
participants are predicting further appreciation in the short
term.

"There is no reason to think that these two currencies will
stop their rally against the dollar in the short term," said
Steven Xu, a treasury economist at Standard Chartered bank in
Hong Kong.

In the long run, however, the won shows more potential to
appreciate than the New Taiwan dollar, said Xu.

At the close of local trading Monday, the U.S. dollar was
quoted at 1,186 won, down from Friday's 1,192 won.

The Taiwan authorities are thought less likely to be tolerant
of further local currency strength, especially after the local
dollar hit a fresh nine-week high Monday, with the U.S. dollar
falling to an intraday low of NT$32.650.

Although Taiwan's central bank denied local media reports that
it was contemplating the introduction of capital controls to
restrict investment inflows, the authority did admit its concern
over the volume of capital flowing into the local equity market.

By the end of trading the U.S. dollar had recovered only
moderately from its earlier low, to finish at NT$32.695, down
from NT$32.721 at the end of the previous trading day.

Nevertheless, market participants remain wary of bidding the
local currency up too far against the U.S. dollar.

"In Taiwan, where the exchange rate is clearly a part of
monetary policy, the central bank is likely to take preemptive
action to keep the currency soft in order to alleviate
deflationary pressure," explained Xu.