Se Asian Currencies Remain On A Rollercoaster
Southeast Asian currencies remained on a rollercoaster on Tuesday, but traders said volatility in the markets appeared to be slowing down.
This is the quietest day Ive had in a week, two weeks, and its still been busy. But these currencies seem to be finding a level now. To coin a phrase, its not the beginning of the end, but its the end of the beginning, one currency trader said.
Indeed, during the day, a Reuter poll of foreign exchange dealers and analysts worldwide was published which showed the experts thought regional currencies would generally end the year lower than they are now.
The ringgit which on Monday was the latest regional currency to succumb to speculator selling remained under pressure during the day.
The currency hit a low of 2.5700 to the dollar overnight in New York a level at which some traders said the Malaysian central bank, Bank Negara, intervened to defend it. At 0830 GMT the ringgit was quoted at 2.5570 in Kuala Lumpur.
Traders said Malaysia wheeled out a big political gun in Acting Prime Minister Anwar Abrahim during the day. His supportive comments about the ringgit appeared to have little impact, however.
My firm view is that under prevailing economic and financial conditions, the ringgit is not overvalued, he told an Islamic capital market conference.
Therefore we are confident that once the speculative activity subsides, the trend for the ringgit will reverse to reflect the underlying favourable fundamentals, he said.
This is all pretty obvious stuff from Anwar. Hes hardly going to tell people to dump his own currency, is he? said a dealer at European bank in Singapore.
The fact is, theres a lot of people running scared. Theyre not quite sure what to do about things. But its calming down, things will settle, he added.
The Reuter poll of 14 currency experts worldwide predicted the ringgit would ease slightly to 2.5879, a rise of around 1.0 percent in the dollar/ringgit rate from current levels.
However, it also showed that the Thai baht was the currency which had the potential to weaken the most.
The poll showed the Thai baht has further to fall with the average of forecasts pointing to the dollar rising to 31.62 baht, about 5.5 percent higher than its current level. Forecasts for dollar/baht ranged from 28.25 to 35.00.
Clearly the baht has to be the one doing the most work, said Kobus van der Wath, regional head of treasury economics at Standard Chartered in Singapore.
Also vulnerable is the Philippine peso, seen weakening to 28.65 per U.S. dollar by the year end a 2.3 percent rise in dollar/peso from current levels.
However, the bulk of the forecasts were on the higher side with a low forecast of 26.50 standing out amid 11 for around 28.00 and one of 32.00.
Similarly, the Indonesia rupiah was seen weakening only slightly to 2481.00, a rise of around 1.3 percent in dollar/rupiah. The rupiah is anyway the subject of a managed depreciation by the Indonesian government.
The rupiah has done the work over the past several years and if you look at purchasing power parity (PPP) level it is actually more than 10 percent undervalued, Its almost the total opposite of the others, Standards van der Wath said.