The Taiwan dollar hit a 21-month high on Wednesday as investors bought local assets in anticipation of policy changes ahead of presidential polls, but the Chinese yuan slid as domestic shares lost ground.
Some Asian currencies received a boost in early trade after billionaire investor Warren Buffett offered to take over some liabilities from ailing US bond insurers, but fears of a US recession continued to haunt other currencies. The Taiwan dollar rose as far as 31.634 to the US dollar, up almost 0.8 percent to its strongest level since May 2006, as foreign investors bought local stocks. Some analysts think reduced tension with China could bring in more foreign capital.
The Singapore dollar rose to 1.4152 per US dollar, up a fifth of a percent from late Asian trade on Tuesday. Warren Buffett said on Tuesday that he had offered to reinsure $800 billion insurers, easing some worries about further fallout from the credit crisis.
His offer eased fears that credit downgrades at US bond insurers could force the sale of billions of dollars of muni bonds. The South Korean won steadied near 945.6 per dollar after hitting 942.3 at one point. The Bank of Korea (BoK) kept its key interest rate at 5.0 percent, as expected, but the market is now looking for a cut in coming months.
Goldman Sachs economists expect the central bank to cut rates by 50 basis points by mid-year, followed by another 25 basis point cut in the second half. "The more-aggressive-than-expected easing by the Fed has increased the likelihood of a more expeditious easing by the BoK," they said in a note.
Most analysts remain bearish on the won, Asia's worst performer versus the dollar so far this year, amid concerns about foreign investors selling local stocks. A bout of late selling drove the Chinese yuan to 7.2270 per dollar after the one-week Lunar New Year holiday. That was down 0.6 percent from its closing level last Tuesday. But analysts believe the sharpest drop since the yuan was revalued in July 2005 reflected a lack of dollar sales by exporters and short covering on the dollar after the holiday rather than a policy shift.
Sean Callow, a strategist at Westpac, said he suspected investors bought the dollar to cover short positions due to disappointment over falls in Chinese stocks, but he maintained his forecast that the yuan would rise to 6.67 by the end of 2008.
Analysts expect the yuan to rise as the central bank tries to quell inflation, because falling US interest rates limit the scope for further interest rate rises in China.
The Thai baht gained one percent to 31.9 per dollar in offshore trading, a day after sliding 3 percent on expectations of imminent government steps to lift capital controls imposed in late 2006 to curb currency gains. Meanwhile, the onshore baht fell 0.2 percent to 32.90 per dollar, pushing up its gap with the offshore rate after the two converged on Tuesday.
Comments
Comments are closed.