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.