Asian currencies: intervention fears limit losses

Asian currencies fell on Tuesday, some to new lows for the year, as foreign investors kept up their liquidation of Asian assets though the fear of intervention by local central banks lent some support.
The Singapore dollar fell as far as 1.7235 before returning to the firmer side of 1.72 on heavy sales of US dollars by local banks that markets suspected were acting on behalf of the Monetary Authority of Singapore.
The Indonesian rupiah hit a three-week low of 9,150 per dollar before rebounding as Bank Indonesia said it had not intervened but would do so if the currency became too volatile.
The Philippine peso rose slightly from an early level of 56.135, its lowest in a week.
The US dollar gave up some of the gains it made against the yen and European majors as markets waited for US GDP and consumer confidence data to confirm Federal Reserve Chairman Alan Greenspan's bullish testimony on the US economy last week. That too provided the region some relief.
"Inasmuch as Asian central banks are concerned about export competitiveness implied by softness in equities world-wide, they are unlikely to tolerate excessive currency weakness either, due to supply-side inflation pressures," Philip Wee, a strategist with DBS Bank, said in a note to clients.
"We don't expect runaway depreciation in Asian currencies."
Still, traders said the early losses showed foreigners were still pulling their money out of Asian stocks and currencies, partly because of rising yields in the United States and because of waning expectations of a revaluation of the tightly controlled Chinese yuan. The Taiwan dollar slipped to 34.16, a fresh low for 2004, and the Thai baht fell to 41.25 a dollar, its lowest since August 2003.
Wee said the baht was the most vulnerable because Thailand ranked second in the region in its exposure to the risks of oil, the yen and stocks. The Taiwan dollar was sensitive to movements in its stock market, he said.
Asian markets have also been pressured by the fall in the prices of US technology stocks. The technology-packed Nasdaq Composite Index posted its lowest close since last October and the Philadelphia Stock Exchange's semiconductor index fell to an 11-month low on Monday.
South Korea's stocks have declined 20 percent while Taiwan's stock market has lost about 23 percent since mid-April.