The Singapore dollar led Asian currencies lower on Friday on worries central banks may again step in after some intervened a day earlier to pull their currencies from multi-year highs to keep exports competitive. The Singapore dollar, which touched a 6-1/2-year high on Thursday, fell 0.2 percent to 1.6212 per dollar. The Taiwan dollar, Asia's second-best performing currency against the dollar this year, slipped a tenth of a percent to 30.820 per dollar, easing from a 4-1/2-year high on Thursday.
Analysts said the Monetary Authority of Singapore, which guides the trade-weighted Singapore dollar within an undisclosed band, may no longer want a stronger currency because of the dim outlook for electronics and bio-medical exports.
MAS has maintained a bias towards appreciation since last year.
"There may be a chance that the MAS may shift to a neutral policy come April," said Emmanuel Ng, currency strategist at ABN Amro Bank in Singapore, referring to the next MAS policy meeting.
"The Singapore dollar's nominal effective exchange rate has been kept on a tight leash in the year to date."
Ng said inflation may not be a major cause for concern for MAS because the effects of high oil prices are likely to be limited. That weakens the argument for a stronger currency.
South Korea made it clear it was uncomfortable with the won's rise, which has made South Korean exporters less competitive against regional rivals.
The won has surged 10 percent against the yen since the start of November and touched a 5-1/2-year high of 9.52 per yen on Thursday.
The won weakened to 9.6 per yen on Friday after South Korea's deputy finance minister, Bahk Byong-won, said the government would not stay idle in the face of rapid currency movements, which he said were driven by speculation.
Given that backdrop, ABN Amro expected the won to strengthen only 1 percent in the next three months to about 990 against the dollar, despite a revival in domestic consumer demand.
J.P. Morgan Chase Bank said in a report that although South Korea does not want a sharp weakening of the dollar, it may not stand in the way of any longer-term weakness.
Concern about the dollar's long-term decline was fuelled on Friday when India's central bank governor, Yaga Venugopal Reddy, said diversification of foreign exchange reserves was being discussed within the bank and that it was a subject of ongoing debate among all central banks.
The peso, Asia's best performer this year, was the only Asian unit to gain on Friday, rising a quarter of a percent.
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