Yen mediation helps SE Asian currencies

Yen mediation helps SE Asian currencies

SINGAPORE (Dow Jones): Southeast Asian currencies rallied
across the board against the U.S. dollar, spurred on by joint
intervention by the U.S. and Japan overnight to prop up the
Japanese yen.

However, all but the wayward Indonesian rupiah gave back some
of their early morning gains as commercial buyers took advantage
of stronger currencies to buy cheap U.S. dollars.

"The rupiah is in a world of its own," said Thio Chin Loo,
currency strategist for Banque Paribas in Singapore. "The spot
moves are dictated completely by what is happening domestically."

The rupiah gained a touch in the early morning on the back of
the yen rally, but dollar-buying by Japanese investors and rumors
of mass anti-government protests planned for Saturday lifted the
U.S. dollar off its early lows. Late in the day, traders said
companies out of the U.K. sold dollars as London opened, pushing
the dollar down even lower against the rupiah than yen
intervention did earlier.

Andrew Dermot Fung, regional strategist with Standard
Chartered Bank in Singapore, said trading in the rupiah did not
follow other regional currencies because dollar-denominated debt
is crippling Indonesian corporations.

"Whether the rupiah is trading at Rp 15,400 or Rp 5,400, you
will still get a lot of corporate blood on the streets, because
they still owe dollar-denominated debt borrowed at levels below
Rp 3,000," Fung said.

The rest of the regional currencies tracked the yen much more
closely.

"Obviously, the Southeast Asian currencies will be very much
biased by what happens with dollar/yen, but in the absence of big
shocks in that market, the regionals will tend to drift weaker,"
Fung said.

"The weak yen was an exacerbating factor in regional currency
weakness, but it was not the fundamental cause, and intervention
hasn't changed that fact," he said. "The outlook for recessions
in the region hasn't changed, so I don't see why anyone would be
aggressively bullish on the regional currencies at the moment."

In Singapore, rumors that the Monetary Authority of Singapore
had intervened in the market in the morning by buying U.S.
dollars at S$1.6550 effectively put a lid on Singapore dollar
bullishness, according to Thio with Paribas.

A trader at a domestic bank in Singapore said there were big
U.S. dollar buyers in the market, but expressed doubt that the
MAS had actually intervened.

"It was probably a commercial buyer," the trader said. "The
market is very nervous and it looks cheap right now for
corporates to buy U.S. dollars."

Traders also cited political uncertainties in Indonesia and
Malaysia as reasons to buy the U.S. dollar against the Singapore
currency.

At 1035 GMT, the U.S. dollar is quoted at S$1.6590, up from an
early low of S$1.6400, but well down from S$1.7190 late Wednesday
in Asia.