EMERGING CURRENCIES
Asian units climb on oil, call for tighter policy for peso
By Melissa Chia
Reuters
First Posted 11:51:00 07/09/2008
SINGAPORE – (UPDATE) The South Korean won spiked to a two-month high on Wednesday after dollar-selling intervention by the authorities, while other currencies, such as the Philippine peso rallied on lower oil prices and comments from the US Federal Reserve chairman.
Oil prices fell more than $5.00 Tuesday, but recovered at least $1.00 on Wednesday after Iranian state media reported that the country had test-fired missiles that could reach Israel and US bases in the region.
Fed Reserve chairman Ben Bernanke's comments that the Fed may keep open the emergency lending facility for big Wall Street firms longer than initially planned somewhat soothed investors' concerns about the health of the US and global financial sector.
Following these reports, investors steered clear of the dollar, which weakened broadly against other major currencies.
"I expect market direction to be choppy with volatility dictated by fuel prices, stock flows and sentiment," said BNP Paribas senior strategist Chin Loo Thio.
The Korean won led gains in Asia and shot up as much as 3.6 percent to 996.75 per dollar, its firmest since end-April. Traders said the central bank had sold more than $3.0 billion to prop up the weak currency, after they had intervened by selling as much as $2.0 billion on Tuesday.
The won has fallen 6.6 percent this year against the dollar, pressured by a deteriorating trade balance in a country that relies almost entirely on imports for its fuel needs.
TIGHTER POLICY FOR PESO
The Philippine peso inched up to P45.55 and rebounded from a near 10-month low hit on Tuesday as worries over inflationary pressures in the oil-importing country eased slightly with receding oil prices.
Still, the Philippine currency has fallen 9.5 percent this year, the biggest loser among other regional currencies excluding the Vietnam dong and Pakistan rupee.
Analysts said the Bangko Sentral ng Pilipinas (BSP), the country's central bank, would have to raise rates when it meets on July 17, to stem the peso's slide while also reining in prices.
"In view of the negative repercussions of the weaker exchange rate, especially via the pass-through to inflation, we continue to expect a tightening move by the BSP at the monetary policy committee next week," said analysts at JPMorgan in a client note.
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