Asian currencies weaker as US housing data boosts dollar

Asian currencies lost some ground on Wednesday after stronger-than-expected US housing data for November reignited expectations of further increases in US interest rates, lifting the dollar against major currencies.
The South Korean won, Singapore dollar, Taiwan dollar and Thai baht all lost between 0.1-0.2 percent from late Asian trading on Tuesday as the US dollar bounced back after last week's drubbing.
The Indian rupee lost almost half a percent to 45.41 per dollar, scaling back from a two-month high on Tuesday, on the dollar's rebound and partly on worries the central bank might step in to curb the gains.
But strong demand for local stocks by foreign investors, that helped drive the benchmark index to a new record this week, helped curb the losses.
The dollar got a boost after data on Tuesday showed US housing starts rose in November to an annualised pace of 2.123 million units from an upwardly revised 2.017 million in October.
Traders said the markets were expecting the US Federal Reserve to raise its benchmark interest rate once more in January to 4.5 percent from 4.25 percent. But strong US economic and inflation data could lead to further rate increases and bolster the dollar in the first half of 2006.
"That puts some upside risk on dollar/won," said Lee Yoon Ho, currency options trading manager at Shinhan Bank in Seoul.
"The most important factor for next year is the US economy. Everybody is worried about the economic data which will show whether the US economy is still recovering. As a result a lot depends on the US dollar interest rate hiking schedule."
Lee expects the won to trade in the range of 1,015-1,025 per dollar in coming days.
Strong foreign inflows into Taiwan stocks helped the Taiwan dollar reduce early losses. Foreign investors have been net buyers of local stocks on all but one day this month. Taiwan is expected to raise its benchmark discount rate by 12.5 basis points to 2.25 percent on Thursday. Analysts said a bigger rate increase could boost the Taiwan dollar.
The Philippine peso and Indonesian rupiah were the exceptions among generally weak Asian currencies on Wednesday, as they gained on the attractiveness of their high-yielding bonds and deposits.
The peso was further supported by a pre-Christmas rush of remittances from overseas workers.