U.S. dollar continues rally in Asia
U.S. dollar continues rally in Asia
Dow Jones, Singapore
Most Asian currencies weakened Wednesday as the embattled
dollar continued to show signs of stabilizing from its recent
slump in global markets.
Local factors also played a role, with the Indonesian rupiah
suffering from another bad day in the stock market and the
Philippine peso succumbing to renewed concerns over the country's
budget deficit.
The Thai baht, South Korean Won and New Taiwan dollar also
weakened, while the Singapore dollar strengthened.
The U.S. currency drew support from its solid performance
against the yen and euro for the third straight session.
A rare warning from Japan's prime minister that the monetary
authorities will continue intervening in foreign exchange markets
to cap the yen's strength against the dollar underpinned the U.S.
currency.
"We are watching markets closely," Junichiro Koizumi told
members of Parliament. Koizumi rarely comments on foreign
exchange.
He added that Japanese officials are in "close contact" with
their U.S. and European counterparts on exchange rate policy. The
Ministry of Finance intervened Friday in currency markets
overseas through the U.S. Federal Reserve and the European
Central Bank.
Most analysts say the dollar's rally over the past few days
isn't sustainable because the fundamental reasons for selling the
currency -- poor performing U.S. stocks, concerns over corporate
accounting problems, and the widening current account deficit --
haven't changed.
The won tracked the yen lower, continuing its recent pattern
of mirroring moves in the Japanese currency.
The dollar closed at 1,207.8 won, up from 1,205.8 won at
Tuesday's close.
The Bank of Korea is expected to hold rates steady at its
policy meeting Thursday after last raising rates in May to head
off the threat of inflation. The recent appreciation of the won
has effectively done some of the BOK's work by curbing imported
inflation.
The peso recovered from early losses, but still finished the
session marginally weaker.
Some traders said comments from the central bank that the
market was overreacting to budget deficit worries prompted some
banks to reduce their excess holdings of dollars.
The dollar closed at 50.740 pesos on the Philippine Dealing
System, up slightly from 50.730 pesos Tuesday. It hit an intraday
high of 50.860 pesos.
The government data show the budget deficit in the five months
to May totaled 107.5 billion pesos, exceeding the target of 78.2
billion pesos for the first six months because of weak revenues.
U.S. dollar short covering dealt a blow to the New Taiwan
dollar.
The U.S. dollar closed at NT$33.595, compared with NT$33.585 a
day earlier.
Banks opted to cover their short U.S. dollar positions against
the New Taiwan dollar after the yen weakened, dealers said.
Continued equity flows out of Indonesia weighed on the rupiah.
The dollar hit an intraday high at Rp 8,990 before closing
Asian trade at Rp 8,965, still above Rp 8,815 at Tuesday's
finish.
The baht lost ground on dollar short covering by offshore
players. However, dollar sales by corporations provided support
to the baht.
Near the end of Asian trading the dollar was quoted at 41.610
baht, up from 41.530 baht late Tuesday.
The Thai finance minister echoed recent comments by the
central bank governor, saying he wasn't concerned about the
impact of the baht's recent strength on exports because the
currency was appreciating in tandem with its regional peers.
The Singapore dollar benefited as some interbank market
participants sold U.S. dollar positions and took profit after a
modest recovery by the U.S. currency.
Late in Asia the U.S. dollar was quoted at S$1.7715, down from
S$1.7730 late Tuesday.