Won defies govt steps and hits new high
Won defies govt steps and hits new high
HONG KONG (Dow Jones): The South Korean won extended its
winning run Wednesday, powering to a fresh two-year high despite
continued government action to hold it back.
The New Taiwan dollar also climbed to a new two-year high at
the start of the day's trading, but surrendered its gains to end
the session a touch lower on heavy central bank intervention.
In Southeast Asia the Thai baht gained ground, rising against
the U.S. dollar, but the region's other currencies remained
firmly range-bound.
The won's continued advance prompted the authorities in Seoul
to promise further measures to stem the local currency's
appreciation and preserve the international competitiveness of
South Korean exports.
The Ministry of Finance and Economy said it will issue over 1
trillion won in won-stabilization bonds next week in order to
fund dollar-supportive intervention in the foreign exchange
market.
The government is also directing local financial institutions
to buy up to $5 billion in the market.
In the long run, however, foreign observers doubt the South
Korean government's measures will do more than slow the pace of
the won's appreciation.
Faced with a current account surplus expected to top $20
billion this year, and direct and portfolio investment inflows
also in excess of $20 billion as foreigners buy into what they
believe is a severely undervalued currency, the South Korean
government has little choice but to accept a stronger won,
analysts say.
By Wednesday's close dollar sales had forced the U.S. currency
as low as 1.126 won, down steeply from 1,139.50 won the day
before.
The New Taiwan dollar also touched a fresh two-year high
Wednesday, with the U.S. dollar falling to NT$31.550 at the start
of trading in Taipei.
By the close, the U.S. currency had been bumped back up to
NT$31.605, leading some market watchers to believe the
authorities have drawn a line in the sand at NT$31.550, at least
for the time being. At Tuesday's close the U.S. dollar had been
at NT$31.600.
In Southeast Asia the baht strengthened in response to
purchases from Thai corporations and offshore market players.
Toward the end of Asian trading the U.S. dollar was quoted at
38.5600 baht, down from 38.7600 baht the previous day.
The upward surge of the Singapore stock market failed to push
the Singapore dollar significantly higher, as market players
hesitated to sell down U.S. dollars, afraid the government would
step in to buy the U.S. currency at S$1.6750.
Late in Asia the U.S. dollar was quoted at S$1.6782, compared
with S$1.6791 the previous day. Most dealers see the U.S.
currency continuing to trade sideways over the coming days,
ranging between S$1.6750 and S$1.6800.
The Indonesian rupiah was also flat, despite fresh revelations
of banking scandal in Jakarta. Late Wednesday the dollar was at
Rp 7,220, little changed from Rp 7,215 Tuesday. Traders see the
current Rp 7,150-Rp 7,300 range holding over the near term.
The Philippine peso was also static, despite growing concerns
over the size of the government's budget deficit. The U.S. dollar
closed at 40.740 pesos compared with 40.730 pesos the day before.