Asia Central Banks Intervene As Currencies Climb
By MARTIN VAUGHAN
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| Agence France-Presse /Getty Images |
The People's Bank of China's decision to fix the yuan at a fresh high record against the U.S. dollar added to bullish views on Asian currencies, which have been trending upward as central banks around the region tighten monetary policies to fight rising inflation.
The Asian currency rally Wednesday appeared to be driven by a rebound in risk-taking sentiment. Recovering from temporary misgivings about U.S. fiscal health following Standard & Poor's rating warning, investors warmed to risk again, pumping more money into Asia's fast-growing economies.
Wai Ho Leong, senior regional economist at Barclay's Capital, said improved risk appetite and also continued high oil prices are some of the factors influencing Asian currencies' move higher. High commodity prices "give policymakers the willingness to tolerate a stronger currency" as a check on inflation, he said.
Many Asian countries have intervened in recent months to stem a decline in the U.S. dollar, which could hurt their export industries. The foreign exchange interventions by the Korean, Thai and Malaysian authorities Wednesday appeared to be aimed at tempering gains in the won, baht and ringgit rather than an effort to stop the upward trend in those currencies.
The Australian dollar reached a new post-float high against the U.S. dollar, fetching US$1.0611 before easing back to $1.0602. Its climb was in part driven by a Dow Jones Newswires report that Australia is weighing a tax break on passive investments by sovereign funds.
The Singapore dollar also notched record highs, as the U.S. currency fell to S$1.2400. The Singapore currency's nearly year-long rally gained momentum last week when the island's central bank revalued the currency and pledged to continue to guide it higher to curb rising inflation.
The PBOC, which tightly controls the yuan, fixed the dollar's exchange rate at 6.5294 yuan, compared with Tuesday's fixing of 6.5346 yuan and close of 6.5305 yuan in the over-the-counter market. Traders said they expect the PBOC to let the yuan rise further ahead of a May 24-25 U.S.-China strategic economic dialogue in Beijing, since China has a record of yuan strengthening ahead of such international events.
The Bank of Korea likely bought about $500 million Wednesday in an effort to curb the won's ascent, traders said. The dollar dipped to 1,082.00 won before ticking up to 1,082.20 won late in Asian trade.
Against the Malaysian ringgit, the U.S. dollar fell to 3.0160, its lowest level since September 1997. That was down from 3.0230 ringgit at Tuesday's close. The ringgit rebounded somewhat on buying by Bank Negara Malaysia, traders in Kuala Lumpur said. The dollar was last at 3.0155 ringgit, with the central bank suspected of more buying at that level.
Further gains could be in store for the ringgit, as it has lagged recently against regional peers like the Singapore dollar, which it tends to track closely. Continued high oil prices will support the ringgit, as will expectations of a rate increase at Bank Negara's next policy meeting, set for May 5.
The Bank of Thailand was suspected of buying dollars as the baht gained ahead of a monetary policy meeting at which the central bank raised interest rates by one-quarter of a percentage point as expected and said interest rates remain on an upward trend. The action helped keep the dollar supported at THB30.02, traders said.
—K.P. Lee and Min-Jeong Lee contributed to this article.
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