EMERGING CURRENCIES
Asian units mostly down, but yuan rises on policy hopes
Reuters
First Posted 12:45:00 05/12/2008
SINGAPORE -- Most Asian currencies fell Monday as rising oil prices prodded investors to trim risky positions, but China's yuan gained on expectations policy makers would let it rise to fight inflation of more than 8.0 percent.
The Thai baht fell to a 2-1/2-month low of 32.2 per dollar, down almost 0.4 percent from late Asian trade Friday, as investors bought the US currency to stop losses.
"Hedge funds are buying the dollar versus the baht and demand also comes from oil companies," said a trader in Bangkok.
The Philippine peso dropped to 42.63 per dollar, down a third of a percent from Friday's close.
The Indonesian rupiah also lost 0.3 percent to 9,264 per dollar.
The peso and rupiah are seen vulnerable to soaring crude oil prices, which hit a fresh record high late Friday of $126.27. They held within sight of the high Monday, at $125.64 a barrel.
The dollar was steady against major currencies after a two-day slide as investors awaited more clues on the policy outlooks for the Federal Reserve and European Central Bank.
The Chinese yuan rose as far as 6.9828 per dollar, approaching its post-revaluation high of 6.9824 hit on April 23, after the central bank set a stronger mid-point.
The dollar's broad strength in recent weeks had helped slow the rise in the Chinese yuan, sparking a sharp yuan sell-off in offshore forward markets on speculation that the Chinese government was trying to slow the currency's rise to support exporters.
Most analysts expect the yuan to rise further as policy makers need a stronger currency to fight inflation, which data showed on Monday accelerated to 8.5 percent in April from 8.3 percent in March.
"We believe that policy makers still like to appreciate the yuan against a basket of currencies of China's major trading partners to reach external balance and to combat inflation," analysts at Merrill Lynch said in a note.
The yuan in one-year non-deliverable forwards trading rebounded to 6.53 per dollar, implying annual appreciation of about 7.0 percent, much lower than 10 percent appreciation that was priced in last month.
Claudio Piron and Yen Ping Ho, currency strategists at JPMorgan, suggested that investors should buy the yuan in offshore forward markets, targeting short-dated contracts.
"We view the sharp dollar/yuan NDF unwind as providing attractive entry levels for short dollar/yuan positions," they said in a note.
Markets in South Korean are closed for a holiday.
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