BLBG: Asian Currencies Halt Rally on Bernanke Comments, Intervention
July 21 (Bloomberg) -- Asian currencies were little changed, halting a five-day rally against the dollar, after Federal Reserve Chairman Ben S. Bernanke signaled a tightening of U.S. monetary policy to prevent inflation accelerating.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, slipped from a six-week high after Bernanke made the remarks in an opinion piece in the Wall Street Journal. Speculation central banks in the region were intervening to combat appreciation and help their exporters compete also kept gains in check.
“There seems to be some risk aversion in all markets,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “Profit-taking has been triggered by Bernanke’s upcoming testimony and his article in today’s Wall Street Journal.”
The Korean won traded at 1,250.50 per dollar as of 2:27 p.m. in Seoul, from 1,250.10 yesterday, according to Bloomberg data. It earlier touched 1,239.38, the strongest level since June 4. The Philippine peso declined 0.2 percent to 48.09. Malaysia’s ringgit and the Taiwan dollar held steady at 3.5415 and NT$32.787, respectively.
The Asia Dollar Index retreated 0.2 percent, after climbing 1.4 percent in the last five days.
“Markets may be a little bit cautious with central banks perhaps expected to show a little bit of discomfort toward undue currency appreciation,” said Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
Yen, Dollar Gain
The yen and dollar rose against higher-yielding currencies. The Japanese currency advanced to 133.40 versus the euro in Tokyo from 134.05 in New York yesterday. It gained to 93.93 per dollar from 94.19. The greenback climbed to $1.4203 per euro from $1.4231.
Bernanke said in the Wall Street Journal that at some point the Fed “will need to tighten monetary policy” to counter the emergence of an inflationary problem. He will later today deliver his semi-annual policy testimony to Congress.
The Korean won strengthened in each of the last five days, its longest winning streak of the year, before a report this week that economists predict will show gross domestic product rose in the last quarter at the fastest pace in five years.
GDP expanded 2.1 percent in the second quarter from the previous three months, the most since 2003, economists forecast in a Bloomberg survey before a central bank report on July 24.
Peso Intervention
The Philippine peso fell, having yesterday reached a one- month high of 47.46 per dollar, on speculation importers were taking advantage of the currency’s strength to buy dollars. The government reported a budget deficit for the first half of 153.4 billion pesos ($3.2 billion), equivalent to 60 percent of its full-year target.
“We saw good corporate demand from oil companies and importers,” said Alan Cayetano, a senior trader at Metropolitan Bank & Trust Co. in Manila. “Everyone saw a dip below 48 as a chance to buy. Plus yesterday we saw heavy central bank intervention.”
The Taiwan dollar rose in each of the last five days, its best winning streak in eight weeks, as China reported a pickup in economic growth and upbeat earnings reports from technology companies suggest demand for the electronic goods produced on the island is strengthening.
The central bank may have bought U.S. dollars yesterday to help “smooth” volatility, said Wai Ho Leong, a Singapore-based economist at Barclays Capital.
Export Slump
Taiwan’s dollar is “relatively stable,” the Central Bank of the Republic of China (Taiwan) said in a faxed statement yesterday, when the currency gained 0.5 percent against the greenback, its biggest advance since June 1. Appreciation may erode the competitiveness of the island’s exports, which dropped for a 10th straight month in June as recessions in the U.S., Europe and Japan curbed demand.
The Thai baht was little changed near this month’s high of 33.99 as intervention concerns limited gains. The currency, which has strengthened in each of the last four months, traded at 34.01 per dollar.
The central bank is “drawing the line at 34,” said Euben Paracuelles, an economist at Royal Bank of Scotland Group Plc in Singapore. “It is going to be there for a while unless we see further changes to the strategy of the Bank of Thailand. They have been buying dollars to keep the baht from strengthening.”
Elsewhere, the Singapore dollar declined 0.1 percent to S$1.4423. Indonesia’s rupiah traded at 10,050 from 10,175 on July 17. The Southeast Asian nation’s financial markets were closed yesterday for a holiday.
To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Bob Chen in Hong Kong at bchen45@bloomberg.net
