Asian currencies ended the week mainly weaker against the US dollar as the greenback strengthened on positive US economic news. However, the yen made big gains as a poor week for stock markets saw dealers become less risk averse and move into the Japanese unit.
JAPANESE YEN: The yen gained ground this week as declines in Asian stocks spurred demand for the safe-haven Japanese currency, dealers said. The Japanese currency stood at 96.31 against the dollar in New York late Friday, compared with 98.40 a week earlier. Overall sentiment in the currency markets "has soured because of falls in stock markets," said Masanobu Ishikawa, a foreign-exchange manager at Tokyo Forex and Ueda Harlow. Unless the mood improves, "selling of risky currencies is likely to persist," he said.
On the Tokyo Stock Exchange, the benchmark Nikkei-225 index lost 349.56 points, or 3.45 percent, to 9,786.26 over the week to June 19. The yen's rise was also backed by selling pressure on the dollar after weak US inflation data trimmed market expectations for the Federal Reserve to raise interest rates later this year.
The May reading for the consumer price index (CPI), which inched up just 0.1 percent from April, was below analyst forecasts of a 0.3 percent rise. The lower inflation data indicating prices are flat and demand low dampened recent optimism for a year-end recovery, dealers said. Also weighing on the dollar was news that Russia and China have agreed to boost the use of their domestic currencies in bilateral trade to reduce dependence on the US unit, analysts said.
Both countries have called for a revamp of the global financial system in the wake of the economic crisis, saying there is a need for a new supranational currency besides the dollar.
AUSTRALIAN DOLLAR: The Australian dollar ended the week lower against the US unit as jitters over the pace of economic recovery strengthened the greenback and weakened commodity prices. The commodities-based Aussie closed Friday at 80.45 US cents, down from 81.52 a week earlier.
"The return of worries about the economic recovery helped boost the US dollar and this weighed on commodity prices and the Australian dollar," said Shane Oliver, chief economist of AMP Capital Investors.
The Australian currency and the country's stock market are both in the midst of a correction on worries that markets have run ahead of fundamentals, he added. The Aussie, which had surged to a high of 82.63 US cents in early June, dropped as low as 79.85 US cents last week before recovering a little before Friday's close. Traders said the unit would remain vulnerable due to the severe global recession and to growing uncertainty surrounding the outlook for the crisis.
But in the longer term, the Australian currency is likely to remain firmer on the back of generally strengthening commodity prices and a resurgence in carry trades.
NEW ZEALAND DOLLAR: The New Zealand dollar finished local trading Friday at 63.85 US cents, down from 64.25 the previous week. Reserve Bank of New Zealand governor Alan Bollard this week warned that buyers of the NZ dollar expecting a strong economic recovery may end up being disappointed. Some economists are arguing that the central bank may have to cut its official cash rate further if rises in the currency and wholesale interest rates continue to hamper the economy's recovery.
The local currency has been hostage to moves in the US dollar but attention is turning to New Zealand gross domestic product data for the March quarter due Friday, which is expected to show the economy was in recession for a fifth straight quarter.
CHINESE YUAN: The yuan closed at 6.8362 to the dollar Friday, compared with Thursday's close of 6.8347 and a closing price of 6.8338 to the dollar the week before. The central bank had set the yuan central parity rate at 6.8338 to the dollar Friday, compared with 6.8321 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 unit ended the week unchanged at 7.751.
INDONESIAN RUPIAH: The rupiah ended at 10,390 to the dollar, down from 10,090 the week before.
PHILIPPINE PESO: The Philippine peso weakened to 48.40 to the dollar on Friday from 47.87 on June 12.
SINGAPORE DOLLAR: bbeThe dollar was at 1.4565 Singapore dollars Friday from 1.4495 the previous week.
SOUTH KOREAN WON: The South Korean currency weakened to 1,268.40 won per dollar Friday, compared with 1,253.90 won a week earlier, as the greenback firmed against regional currencies.
Dealers said the won was likely to weaken further because of a lack of momentum in the stock market and uncertainties over North Korea's pursuit of nuclear and missile programmes. The dollar may trade between 1,264 and 1,272 won when the market reopens on Monday, they said.
TAIWAN DOLLAR: The Taiwan dollar fell 0.24 percent in the week to June 19 to close at 32.878 against the US dollar. The local currency closed at 32.800 a week earlier.
THAI BAHT: The Thai baht was stable against the greenback over the past week with trading lacklustre throughout, dealers said. The Thai unit closed Friday at 34.13-15 baht to one dollar compared to previous week's close of 34.10-13.
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