Won soars to 4-month high as rupiah falls

Won soars to 4-month high as rupiah falls

HONG KONG (Dow Jones): Soaring market sentiment drove the South Korean won to its highest level in over four months Thursday, prompting central bank intervention to suppress the currency's rise.

Asia's other regional currencies fared less well, as market concerns over Aceh's calls for independence plunged the rupiah to its lowest level since Indonesia's presidential elections three weeks ago.

The nervousness spilt over to affect other Southeast Asian markets, dragging the Singapore dollar, Thai baht and Philippine peso lower.

Sentiment toward South Korea, already riding high after a long-expected liquidity crisis failed to materialize, was further boosted Thursday when ratings agency Standard & Poor's Corp. upgraded the country's sovereign ratings, citing the strength of its economic recovery.

The upgrade triggered heavy buying of the local currency, which briefly pushed the dollar to a four-month low of 1,169.70 won before the Bank of Korea stepped into the market to buy dollars in a rare direct intervention.

"Continued strong portfolio capital inflows from abroad and a good supply of dollars to the market from local exporters have led to intense appreciative pressure on the won in the last few days," explained David Simmonds, Asian currency strategist at Citibank in Singapore.

By the end of trading in Seoul, the central bank's intervention had lifted the dollar from its earlier lows. But closing at 1,173.10 won, the U.S. currency remained well below Wednesday's close of 1,180.00 won.

Investment inflows and exporters' sales of U.S. dollars also lifted the New Taiwan dollar Thursday. At the close of dealing in Taipei, the U.S. currency was quoted at NT$31.745, down from NT$31.754 the previous day.

In Southeast Asia, the market's growing concern that calls for independence by the North Sumatran province of Aceh could evolve into a fresh Indonesian crisis triggered heavy buying of dollars against the rupiah.

Market participants who went long in the rupiah at the time of Indonesia's presidential elections three weeks ago anticipating a major post-election rally were seen buying dollars to cover their positions.

In conditions of thin market liquidity, the buying rapidly pushed the dollar above the 7,000 rupiah mark to reach Rp 7,150 late in Asian trading, up over Rp 250 compared with Rp 6,897 late the previous day.

The rupiah's fall soured sentiment toward other currencies in the region, dragging the Thai baht, the Singapore dollar and the Philippine peso all lower.

Dealers also cited Thailand's political backdrop as a reason to sell the baht, saying an opposition no-confidence motion tabled for next month was deterring foreign investment in the country.

Late in Asian trading, the dollar had risen to 39.0450 baht, up from 38.9600 baht the day before.

The Singapore dollar also slipped in line with the regional trend, with some traders suggesting that market participants caught long in the rupiah were attempting to hedge their exposure by selling the Singapore dollar short.

Toward the end of Asian interbank dealing, the U.S. currency was quoted against the Singapore dollar at S$1.6763, up from S$1.6723 the previous day.

The Philippine peso also closed down, with the U.S. dollar rising to end trading in Manila at 40.323 pesos, up from 40.270 pesos at Wednesday's close.