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.