Yen lends support to Asian currencies, rupiah pressured

Yen lends support to Asian currencies, rupiah pressured

SINGAPORE (Dow Jones): A firmer yen lent support to most Asian regional currencies Tuesday, while heightening political tensions in Indonesia kept pressure on the rupiah.

The Indonesian rupiah closed lower Tuesday in steady trading as offshore participants continued to square forward positions.

Hundreds of supporters of embattled President Abdurrahman Wahid occupied a ferry port in Surabaya and warned of a bloody uprising if opponents try to oust the President, much more popularly called with his name Gus Dur, on allegations of corruption. The port city is located in Gus Dur's political base of East Java.

However, the effect on the rupiah was muted due to new regulations imposed by the central bank designed to limit speculative trading of the currency.

The dollar closed Asian trading at Rp 9,575, up from Rp 9,560 late Monday.

New offshore trading rules that came into effect last month ban onshore banks from lending rupiah offshore. Offshore players have to square forward positions to come into line with the new regulations by Wednesday.

Players squared off long-rupiah positions, buying U.S. dollars, traders said.

Also, corporate demand for dollars is expected to remain strong going forward and should prop up the dollar, they added.

The dollar is expected to trade Wednesday between Rp 9,525 and Rp 9,585.

After flirting with the 116 yen mark only one day earlier, the dollar fell to Y114.33 late Tuesday, its lowest level in more than a month, as investors in Tokyo expressed their increasing concern about the outlook for the U.S. economy.

The South Korean won, New Taiwan dollar, Thai baht, Singapore dollar and Philippine peso all benefited from the stronger yen.

The U.S. dollar closed at NT$32.288, down from NT$32.309 Monday, and its lowest close since Nov. 18.

The local currency reached an intraday high of NT$32.231 to the U.S. dollar before the central bank intervened to slow the decline of the U.S. currency. That triggered short covering in the afternoon session which helped lift the U.S. dollar off its intraday low.

The Thai baht floated higher with the rising yen as market participants waited to see the final shape of incoming Prime Minister Thaksin Shinawatra's government.

Late in Asia the dollar was quoted at 42.345 baht, down from 42.525 baht the previous session. However, the U.S. dollar's underlying bullish trend remains in place and the pair are likely to trade in a 42.200 baht-42.700 baht range in the intermediate term, said UBS Warburg's Mansoor Mohi-uddin.

The dollar closed at 48.610 pesos on the Philippine Dealing System, down from 49.110 pesos Monday. T he absence of fresh negative developments in both the political and economic fronts supported the peso's rise.

The Singapore dollar traded in a narrow range as market players awaited an exchange rate policy statement from the Monetary Authority of Singapore later this month.

Late Tuesday, the U.S. dollar was at S$1.7407, compared with S$1.7410 late Monday.

The MAS said it would release the statement when it issues its Annual Economic Survey, due out in the third week of February.

The slowdown in global economic growth has prompted many analysts to speculate that MAS will announce it is adopting a more accommodative foreign exchange policy.