Asian currencies rise against US dollar

27 Nov, 2006

Asian currencies rose against the dollar, which slid world-wide over concerns about the prospects for US economic growth.
JAPANESE YEN: The yen rose over the week in thin holiday trading, buoyed by speculation about possible rate hikes while concern about US growth prospects hit the greenback.
The yen jumped to 116.37 to the dollar on Friday, rising sharply from 118.38 a week earlier.
The yen's recent gains against the dollar were "largely driven by hedge funds looking to square up short yen positions ahead of the US holiday," wrote John Kyriakopoulos, a currency strategist at National Australia Bank.
Dealers were scratching around for fresh leads following Thanksgiving Day in the US and Japan's Labour Thanksgiving holiday.
They said the yen could make further gains against the dollar amid signs that the so-called yen carry-trade - when speculators borrow cheap funds in Japan to invest elsewhere - might be starting to unwind.
Japanese interest rates were also likely to rise, analysts said.
"I'm sure the BoJ will raise rates," said Hidenori Kato, the head of foreign exchange sales at Societe Generale.
"It's only a question of when - by the year-end or early next year."
The yen was also firmer against the euro following comments from Luxembourg Finance Minister and Eurogroup spokesman Jean-Claude Juncker that the currency's fall in the last few months had run too far.
The Japanese unit jumped against the dollar after the White House trimmed its forecast for US economic growth by 0.5 percentage points to 3.1 percent for 2006.
Japan meanwhile said its trade surplus shrank by a bigger-than-expected 24.8 percent in October to 614.70 billion yen (5.21 billion dollars) on higher raw material costs.
AUSTRALIAN DOLLAR: The range-bound Australian dollar is unlikely to shunt much higher next week, although its lower limit has risen from earlier forecasts, dealers said.
The local currency was trading at 77.52 US cents at 5:00 pm Friday (0600 GMT), up from the previous week's 76.62 US cents.
ANZ senior currency strategist Tony Morriss said that while the domestic unit had staged an impressive rebound, there were obstacles to further gains.
"While a barrier gave way above 77.20 US cents, there is still a major area of resistance up to 78 US cents where other barriers are reported to have been set," he said.
Morriss also warned that the rally took place in particularly thin conditions due to US and Japanese holidays during the week, raising questions about whether current levels could be sustained.
However, he said any correction in the local currency was unlikely to be significant, with solid support having formed above the 76 US cent level.
"We have underestimated the erosion of support for the US dollar and the impact of positive capital inflows for the Australian dollar," he said.
"It looks increasingly unlikely that we will see much of the correction in the AUD over the month ahead. The scenario is for a break higher."
The weaker US dollar had been the latest factor helping drive the local currency towards 78 US cents, Morriss said.
"The 78 to 80 US cent area may depend more on whether the US dollar weakens further and specifically whether the euro/US dollar can break above the 1.30 US dollar level."
However, uncertainty lay ahead with December traditionally providing no pattern for the Aussie dollar in relation to the greenback, he said.
"There are notably large swings in performance over this period."
Fortunately seasonal factors might provide some support in the New Year, he said.
Meanwhile AMP chief economist Shane Oliver expected the domestic unit would continue spinning its wheels in the same range it has been in for the last three years - between 68 and 80 US cents.
"While fair value is around 70 US cents, the Aussie dollar is likely to remain modestly overvalued, with the currency still supported by high commodity prices and high interest rates in Australia," he said.
NEW ZEALAND DOLLAR: The New Zealand dollar ended the week at 67.05 US cents, up from 66.50 US cents the previous Friday.
The kiwi dollar shrugged off fresh trade data, showing October produced the second worst monthly deficit on record, as well as talk investors were losing their appetite for high yielding currencies like the kiwi. Central bank governor Alan Bollard has threatened to hike interest rates again and is due to review rates on December 7.
Another hike would cause the New Zealand dollar to spike higher and would exacerbate the trade problem.
UBS economist Robin Clements said that at the end of the day the trade data was bad for the currency.
CHINESE YUAN: The yuan closed at a fresh closing high of 7.8506 to the dollar Friday on the exchange-traded market, compared with Thursday's close of 7.8605, and a closing price of 7.8700 to the dollar the week before.
On the over-the-counter (OTC) market, the yuan also hit at a new high of 7.8525, compared with 7.8620 on Thursday.
The currency traded between 7.8569-7.8520 on the OTC market, and between 7.8552-7.8506 on the exchange-traded market, according to a Shanghai-based dealer.
The central bank set the yuan central parity rate at a record of 7.8526 to the dollar, compared with the midpoint of 7.8596 set on Thursday.
The People's Bank of China allows a trading band of 0.3 pct on either side of the midpoint.
HONG KONG DOLLAR: The US-pegged Hong Kong dollar ended the week at 7.786, unchanged from the previous week.
INDONESIAN RUPIAH: The rupiah ended the week slightly stronger at 9,140-9,145 to the dollar compared to the previous week's close of 9,160-9,165.
PHILIPPINE PESO: The Philippine peso rose to 49.71 to the dollar on Friday from 49.96 on November 17.
SINGAPORE DOLLAR: The dollar was at 1.5574 Singapore dollars on Friday from 1.5616 the previous week.
SOUTH KOREAN WON: The won closed at 932.60 won per dollar, compared with 938.90 won a week earlier, reflecting the weakness of the greenback amid doubts about US economic prospects.
Dealers said the dollar-won exchange rate might be somewhere between 928 and 935 won when the market reopens on Monday.
TAIWAN DOLLAR: The Taiwan was at 32.833 against the US dollar on Friday compared with 32.934 a week earlier.
THAI BAHT: The Thai baht rose against the dollar over the past week after the central bank governor rejected calls for intervention to curb the baht's gains and hinted at a further rise in the local currency.
The Thai unit closed Friday at 36.51-53 baht to the dollar, up from 36.60-64 a week earlier.

Read Comments