U.S.-Japan trade row may lower currencies
U.S.-Japan trade row may lower currencies
SINGAPORE (AFP): The latest U.S.-Japan trade row could
temporarily deflate the currencies of booming Southeast Asian
economies against the U.S. dollar, but the greenback's medium-
term prospects are still bearish, analysts said yesterday.
They cautioned that the yen would continue climbing against
the greenback if Washington proceeded with trade sanctions
against Tokyo -- a development that could stifle Japan's economic
recovery and its investments in the region.
"While the trade issue has been quite discounted by the
market, regional currencies will move down against the dollar,
currently quite under-weighted, in the short-term," said Lionel
Heng, a Singapore-based currency strategist with the British firm
Institute for Development of Economic Analysis (IDEA).
Heng said the market however still favored buying the yen
against the dollar in the medium-term, which he added could give
further room for regional currencies to continue rising against
the greenback.
"Regional economies will want their currencies to maintain the
uptrend against the U.S. dollar in the medium-term as an anti-
inflationary measure, especially when there is a possibility of a
U.S. interest rate hike in September," Heng said.
The Singapore dollar has appreciated by about five percent
against the greenback in the first quarter of 1995, on top of a
10-percent rise in 1994, and the Thai baht and the Malaysian
ringgit have firmed about three percent, foreign exchange dealers
here said.
Rupiah
The Indonesian rupiah however depreciated two-to-three per
cent against the U.S. dollar between January and March, they
said.
The U.S. dollar was quoted just below 84 yen in early trading
here, about three weeks after hitting a global record low of
79.75 yen in Tokyo.
The greenback rose to 24.59 Thai baht from 24.53 on Tuesday,
2.4680 Malaysian ringgit from 2.4650, 1.3927 Singapore dollar
from 1.3915 and was unchanged at 2,226 Indonesian rupiah. The
foreign exchange market was closed for a holiday Wednesday.
Analysts said the yen's appreciation against the U.S. dollar
had somewhat slowed in recent days by a market perception that
the U.S. threat of sanctions to open Japan's automobile market
might lead to a resumption of trade talks between the two
countries.
Japan's huge trade surplus with the U.S. was cited as the main
reason for the dollar's slump against the yen this year.
Phoon Kok Fui, the Singapore-based regional head of Japan's
Yamaichi Merchant Bank equities research department, said
increased Japanese investment flow into Southeast Asia "may not
be forthcoming" if Washington launched sanctions against Tokyo.
"Even if Japan wants to further relocate its industries in the
region due to the strong yen, they will be hampered by a
worsening of economic problems caused by the sanctions," Phoon
said.
He added: "There is not much faith in the dollar for the long-
term. Even if it continues its fall below the 80 yen level, it
will have a dramatic effect on the Japanese economy."
Singapore's Banque Nationale de Paris chief dealer Samuel Leow
said the current U.S.-Japan trade dispute could erode the U.S.
dollar's current strength to around the 80 yen level.
"The dispute is definitely a depressing thing and could put a
top on the dollar-yen," Leow said.