Yen's rebound boosts SE Asian currencies

Yen's rebound boosts SE Asian currencies

SINGAPORE (Dow Jones): Although a rebound in the Japanese yen lent strength to most Southeast Asian currencies during regional trading hours on Tuesday, the Singapore dollar failed to benefit, slumping to a fresh five-month low against the U.S. dollar.

After the U.S. dollar broke above trendline resistance at S$1.7180 in early trading, a brief flurry of stop-loss buying pushed the U.S. currency as high as S$1.7225, its highest level since Sept. 23.

Elsewhere in Asia, the yen's recovery from Monday's lows, which saw the U.S. dollar dip briefly below Y120, down from its high of Y122.55 on Monday, provided a powerful shot in the arm for regional currencies. Boosted by the rising yen, the Thai baht, Philippine peso, new Taiwan dollar and South Korean won all ended the day higher.

But although the relative strength of the yen was a major factor influencing Asian markets Tuesday, analysts and traders were reluctant to attribute each and every price swing to a move in the U.S. dollar/yen exchange rate.

"Clearly there is a yen effect, but one can't say these currencies are moving 100% because of the yen," said Ron Leven, foreign exchange strategist at J.P. Morgan in Singapore.

The Singapore dollar's decoupling from the yen was most obvious, as traders and investors continued to sell the currency in reaction to the weekend's trade figures, which showed an unexpectedly steep 6.4 percent decline in the country's non-oil domestic exports for January.

"The Singapore dollar is marching to the same drum it has been marching to since last October: a trend weakening," declared Andrew Fung, a Singapore-based treasury economist at Standard Chartered Bank.

Late in Asia on Tuesday, the U.S. currency was quoted at S$1.7192, down slightly from its earlier intraday high, but still significantly above S$1.7147 late in Asian trading the previous day.

Although the baht ended Tuesday's session in Asia higher against the U.S. dollar, in line with the stronger yen, traders said the Thai currency, like the Singapore dollar, was propelled largely by its own dynamic, and not solely by trading in the Japanese currency.

Market players, they said, were taking advantage of short-term implied yields as high as 22 percent to buy into the currency via the forward market after the U.S. dollar failed to break upward through resistance at 38 baht.

Toward the end of Asian dealing, the U.S. dollar was quoted at 37.5150 baht, down from 37.7250 baht late the previous day.

The U.S. dollar also slipped against the Philippine peso. Although much of the U.S. currency's fall was attributable to its softness against the yen, the peso was also bolstered by the market's underlying bullishness on the Philippine economy.

"All it needs is one good story for investors to turn around and buy the peso," said Fung at Standard Chartered. "Although inflation has been higher than analysts had forecast, the market appears willing to give President (Joseph) Estrada's administration the benefit of the doubt when it comes to economic policy."

By the close of domestic trading, the U.S. dollar had slipped to 38.99 pesos from 39.260 pesos at Monday's close.

Against the Indonesian rupiah, the U.S. dollar dropped to end the Asian day at Rp 8,845, compared with Rp 8,905 the day before.

In north Asia, the rise of new Taiwan dollar was assisted by central bank intervention, with the authorities estimated by traders to have sold $200 million in support of the local currency.

At the close of the domestic session the U.S. dollar was quoted at NT$33.028, down from NT$33.102 at the previous day's finish.

In Seoul, in trading against the South Korean won, the U.S. currency closed at 1,212.5 won, compared with 1,216.1 won the day before.