Fears over the scale of the reverberating US sub-prime mortgage market left Asian currencies vulnerable to sharp swings, with the Japanese yen closing the week much firmer against the dollar but most other currencies down.
JAPANESE YEN: The yen soared to a 14-month high against the dollar in the past week as players scrambled to exit risky bets in the middle of global stockmarket plunges due to a US credit crunch.
The Japanese currency peaked at 111.60 to the dollar before ending Friday's daytime trading at 112.70-73 to the dollar, far higher than 118.07-09 to the dollar a week earlier. Amid worries over the US subprime housing loan market, speculators kept unwinding so-called "carry trades," in which they borrowed currencies with low interest rates, such as the yen, to buy those with higher yields.
"The market is in a state of panic with investors continuing to reduce risk with no idea when this is going to stop nor how serious the problems are," Bank of Tokyo-Mitsubishi UFJ currency research manager Kikuko Takeda said.
With no flooring in sight, the greenback could fall below 110 yen, Hachijuni Bank forex dealer Yoshifumi Suzuki said.
"All markets from foreign exchange to stocks to other products are falling like dominoes and unless the markets calm down traders will keep squaring their positions," Suzuki said.
In a circular effect, the Tokyo market plunged Friday on worries over the stronger yen, which weakens exporters by making their products less competitive.
The Bank of Japan is seen likely to postpone any hike in interest rates when it holds a monetary policy meeting on Wednesday and Thursday next week.
"As it remains unclear when calm returns to the market, trading is expected to be nervous and swayed by speculation on credit risks," the business daily Nikkei said on its Internet edition on Friday.
AUSTRALIAN DOLLAR: Further falls are likely in the Australian dollar this week but the downside should be limited without a major collapse in commodity prices and may reverse once the current market turmoil eases, dealers said.
Over the week the Aussie lost around 10 percent of its value against the US unit, falling three cents on Friday to trade at 77.41 US cents in late local trade, down from 84.25 cents the previous Friday.
It fell further after the close of local trade and is now down more than 11 US cents from its peak of 88.74 US cents, hit on July 25. ICAP senior economist Matthew Johnson said no one wanted to buy the Aussie under the current risk-averse conditions.
"There are a lot of reasons why the Aussie could fall and it could fall a lot further," he said, but added that there was a limit to how far it would go.
"It's not really going to go back to the low 70s. You would actually need a large collapse in commodity prices to get back down that far." Shane Oliver, chief economist at AMP Capital, said once the market turmoil eases, the Australian dollar would likely stage a recovery.
"The plunge in the Australian dollar is likely to reverse once the dust settles in share and credit markets. Commodity prices are likely to remain high and Australia's high interest rates remain supportive of the Australian dollar," he said.
NEW ZEALAND DOLLAR: The New Zealand dollar ended a dramatic week amid global market turmoil at its lowest closing level since November last year of 67.15 US cents, down from 74.50 the previous Friday.
Turmoil over a feared global credit crunch have seen investors backing out of so-called carry trades in which they borrowed in low interest currencies such as the yen to buy high interest currencies such as the New Zealand dollar.
The kiwi is likely to face another torrid session on Monday morning when more than 2.5 billion dollars of foreign bonds denominated in New Zealand dollars are due to mature. "The significant concentration of debt maturing in the next couple of weeks suggests some downside risks to the NZ dollar if Japanese retail appetite starts to falter," said BNZ currency strategist Danica Hampton.
On Thursday, the kiwi plunged three US cents in its biggest one-day fall for 21 years and there was further weakness Friday due to a sharp fall on the Japanese sharemarket.
CHINESE YUAN: The yuan closed at 7.5975 to the dollar Friday on the exchange-traded market, compared with Thursday's close of 7.5983, and a closing price of 7.5763 to the dollar the week before. On the over-the-counter market, it ended at 7.5951 to the dollar against 7.6040 the previous day.
The central bank had set the yuan central parity rate at 7.6003 to the dollar Friday, compared with 7.5981 on Thursday. The People's Bank of China allows a trading band of 0.5 percent on either side of the midpoint.
HONG KONG DOLLAR: The US-pegged Hong Kong Dollar ended the week at 7.822, from 7.82935 a week earlier.
INDONESIAN RUPIAH: The rupiah ended the week trading at 9,460/9,470 to the dollar, compared to 9,335/9,345 to the dollar a week earlier.
PHILIPPINE PESO: The Philippine peso traded lower at 46.85 to the dollar on Friday afternoon from 45.74 on August 10.
SINGAPORE DOLLAR: The US dollar was at 1.5361 Singapore dollars Friday from 1.5207 the previous week.
SOUTH KOREAN WON: The won's value fell sharply against the dollar and the yen as the unwinding of the yen carry trade was accelerating and foreign investors sold South Korean shares for fear of fallouts from the US subprime mortgage turmoil.
The dollar-won exchange rate rose to a five-month high of 950.40 won per dollar Friday, compared with 931.90 won a week earlier. The Ministry of Finance and Economy said in a statement on Friday that the government regards the sharp falls in the won's value as corrections for the South Korean currency which it said had strengthened too rapidly.
TAIWAN DOLLAR: The Taiwan dollar rose 0.10 percent in the week to August 17 to close at 32.931 against the US dollar. The local currency closed at 32.965 a week earlier.
THAI BAHT: The Thai baht fell against the dollar over the past week as fleeing foreign investors dumped the local unit in line with heavy stock losses triggered by the US housing loan crisis, dealers said. The Thai currency closed Friday at 34.50-55 to the dollar, down from 34.07-09 a week earlier.
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