Thai baht rises against dollar, Singapore's currency plunges
Thai baht rises against dollar, Singapore's currency plunges
SINGAPORE (Dow Jones): The courses taken by Southeast Asian
currencies diverged sharply on Thursday. As a steady stream of
investment inflows lifted the Thai baht to a fresh 58-week high
against the U.S. dollar, heavy sales of the Singapore dollar
pushed the island republic's currency to its lowest level in 10
days.
In already illiquid markets rendered thinner still by
Thursday's Thanksgiving holiday in the U.S., the rally in the
Thai baht monopolized dealers' attention.
Throughout the Asian morning constant sales of U.S. dollars
from offshore U.S. banks -- estimated by one U.S. bank trader in
Singapore to amount to hundreds of millions of dollars -- pushed
the U.S. currency nearer and nearer to the psychologically
important 36 baht barrier.
Despite aggressive dollar buying from banks widely believed by
traders to be acting as agents of the Bank of Thailand, in early
afternoon dealing the U.S. currency at last broke down through 36
baht to hit an intraday low of 35.97 baht, its weakest level
since Oct. 14 last year.
Although the U.S. dollar bounced back late in the Asian day to
reach 36.02 baht, compared with 36.09 baht late Wednesday, most
traders and analysts believe the Thai currency's rally, fueled by
healthy inflows of investment capital, is a long way from running
out of steam.
"The baht's appreciation looks set to continue, even though
there is likely to be a fundamental shift in terms of what is
driving the inflows," said Andrew Fung, treasury economist at
Standard Chartered Bank in Singapore.
Although at current levels the Thai baht is still 31 percent
below its value immediately prior to devaluation on July 2, 1997,
since the end of June 1998 the currency has rebounded by nearly
17 percent against the U.S. dollar.
To date, portfolio flows into Thai asset markets and direct
investment in Thai corporations by foreign companies
recapitalizing or extending their Thai operations have
underpinned the baht's new-found strength. As gradual progress
toward economic reform has boosted investor confidence in
Thailand, falling interest rates have triggered a local stock
market rally, leaving Thailand once again an attractive
destination in the eyes of international institutions.
While the baht strengthened, the Singapore dollar headed the
other way, dropping sharply as the U.S. dollar pushed upward
through resistance at S$1.64.
"We are seeing a whole lot of (U.S. dollar) buying from the
local banks," said one trader at a U.S. bank in Singapore.
The Singapore banks, he said, were selling the local currency
in anticipation of heavy profit-taking from foreign equity
investors after Singapore's benchmark Straits Times stock index
ended flat on Thursday after a protracted rally.
"The next target is S$1.65, and after that S$1.66 and S$1.67.
But S$1.68 will prove difficult to break," the trader predicted,
saying the U.S. dollar would remain confined in a broad
S$1.62-to-S$1.68 range over the medium term.
Late in Asian trading, the U.S. dollar was quoted at S$1.6462,
up from S$1.6390 late the day before.
Elsewhere in the region, the Philippine peso ended lower, with
the U.S. dollar strengthening to close at 39.49 peso, up from
39.45 peso the previous day.
The rupiah ended the day virtually unchanged, with the U.S.
dollar at 7,450, compared with 7,474 late on Wednesday.
In North Asian markets, the new Taiwan dollar ended up a
fraction, boosted late in the day by central bank intervention,
according to local traders.
At the domestic close, the U.S. dollar was quote at NT$32.482,
down from NT$32.484 at Wednesday's finish.
In Seoul, the won also ended up, lifted, like the baht, by
foreign investment inflows. Against the South Korean currency the
U.S. dollar closed at 1,240 won, compared with 1,250 won at
Wednesday's close.