EMERGING CURRENCIES
(UPDATE) Peso dives as global growth concerns persist
Reuters
First Posted 11:54:00 08/14/2008
Filed Under: Economy, Business & Finance,Foreign Exchange Markets
SINGAPORE -- The Philippine peso was the top loser in Asia on Thursday as renewed global growth concerns helped the US dollar resume its broad rally while a rise in oil prices weighed on the region.
The peso hit 44.94 per dollar, a four-week low. Traders said it was falling rapidly as it caught up with the losses of its peers.
Compared with a loss of nearly 5.0 percent in the Singapore dollar since mid-July and a drop of 3.0 percent in the South Korean, won the peso has risen 0.8 percent in that period.
"Dollar/Asia went up a day or two days ahead of dollar/peso," a trader in Manila said.
The Philippine central bank said on Thursday it would stick with a monetary tightening bias until it sees a pull-back in inflation. It has raised rates twice since June.
The dollar gained for a 10th day against a basket of major currencies, as deepening concerns over growth in the euro zone and Australia and continuing turmoil in financial markets hurt high-yielding currencies and assets.
Meanwhile oil also seemed to have reversed a losing streak in the first part of this week as crude prices extended gains to above $116 a barrel. Most of Asia, barring Malaysia, imports oil.
With the exception of the South Korean won which was sheltered by the Bank of Korea's intervention overnight, most other Asian currencies weakened.
Analysts said they expected the dollar's uptrend and Asian weakness to persist until the end of the year.
"Asian FX will resume its appreciation trend in the first quarter of 2009," said JPMorgan's currency strategist Claudio Piron. "JPMorgan's view is that the global downturn will be shallow and that the gradual growth recovery in 2009 should lend support to Asian currencies," he said.
The risk to that view was from protracted and deep recession in the world's major economies, he said. But even in that scenario there was no guarantee foreign investors would continue buying US assets, he said.
Some analysts recommended selling the dollar against the yuan a trade that would hedge investors against the risk of a reversal in the dollar rally while also exploiting what they feel is the market's underpricing of prospects for yuan appreciation.
Vishnu Varathan, analyst at Forecast, said he forecast the euro hitting $1.4 by the year end, easing sharply from current levels around $1.4920.
The won, peso and Indian rupee could be Asia's top losers as the dollar clawed higher, he said.
SINGAPORE DOLLAR FALLS
The Singapore dollar and Malaysian ringgit which had gained on Wednesday during the brief pause in the US dollar's rally, gave up those gains and fell half a percent each.
Varathan said that given the Singapore dollar's strong links with the euro -- it forms a big part of its trade-weighted basket -- it would weaken over the longer term.
"We expect that a weaker Singapore dollar is in line with a broad based US dollar rally and in particular for the euro to lose more ground against the US dollar," he said.
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