Won, New Taiwan dollar rally on foreign equity inflows

SINGAPORE (Dow Jones): Asian currency markets followed divergent trajectories Tuesday.

In North Asia, foreign equity inflows continued to bolster the South Korea won and New Taiwan dollar, while most of the Southeast Asian currencies, except the Philippine peso, languished.

The Indonesian rupiah closed flat in quiet trading Tuesday as the market ignored data that showed the economy grew 4.8 percent last year after being in the doldrums during the previous three years.

The dollar closed at 9,615 rupiah, unchanged from its close Monday.

The government Tuesday announced the economy grew 4.8 percent last year, driven by exports, investment and private consumption.

However, the data didn't affect the market as it was in line with expectations.

"Besides the news being discounted by the market, economic growth this year isn't expected to be as healthy as last year due to a slowdown in the U.S. economy," said a dealer with a foreign bank.

Spot trading also hasn't felt any impact from the trading in rupiah non-deliverable forwards in Singapore - which started Monday - as the rupiah NDF trading so far has attracted limited participants.

Dealers expect the dollar will trade between Rp 9,610 and Rp 9,620 Wednesday.

The stock markets in South Korea and Taiwan have gotten off to a blistering start this year, with their main indexes up 21 percent and 26 percent respectively.

The won closed at its highest level this year as foreign investors snatched up the currency to fuel their stock purchases.

The dollar finished at 1,235.8 won late Tuesday, down from 1,246.9 won on Monday. The won has appreciated 2.4 percent so far this year.

However, the outlook for both the won and New Taiwan dollar is less optimistic given the economic slowdown the region is experiencing, in part due to diminished U.S. demand for Asian exports, UBS Warburg's Mansoor Mohi-uddin said in a note to clients.

"Given our bearish view on the region and on the U.S. economy we continue to expect the (U.S.) dollar to rebound against both currencies," Mohi-uddin said. UBS Warburg forecasts the dollar will rise to 1,300 won over the next few months.

The New Taiwan dollar also closed at its highest level this year on the back of inflows from foreign equity funds.

The U.S. dollar finished at NT$32.271, down from NT$32.290 Monday. The New Taiwan dollar is up 2.5 percent in 2001.

Some dealers said they were surprised by the central bank's willingness to let the local currency close at its highest level since the NT$32.237 to the U.S. dollar recorded Nov. 17.

The Philippine peso was the only Southeast Asian currency to gain on the dollar Tuesday.

Demand for U.S. dollars abated because oil importers and some companies have already fulfilled their dollar requirements, a dealer at a local bank said.

The dollar closed at 47.630 pesos on the Philippine Dealing System, down from 47.850 pesos on Monday.

Another trader said some banks opted to take profits on the dollar as it touched the 48 pesos level.

"Some of the banks were just waiting for an opportunity to sell dollars and many thought that 48 pesos is a good level to sell," he said.

In Thailand new Prime Minister Thaksin Shinawatra attributed Tuesday's decline in the baht to poor trade data for January rather than lack of investor confidence in the new government.

Thaksin told reporters he was exploring measures to turn around the economy. "We have to put the economy back on track as soon as possible," he said.

The baht has slipped since late Friday, partly due to preliminary data showing a $400 million trade deficit in January, the first deficit in almost three years.

Late in Asia the dollar was quoted at 42.710 baht, up from 42.620 baht late Monday.

The Singapore dollar edged lower ahead of an expected foreign exchange policy statement Thursday by the Monetary Authority of Singapore.

The U.S. dollar was quoted at S$1.7387 in late Asian trading, up from S$1.7373 late Monday.

Bank of America recommended holding long U.S. dollar positions heading into the meeting on the expectation the U.S. currency will rise following the statement.