SINGAPORE, March 31 - Asian currencies were a mixed bag early on Monday as players struggled to find a balance between a broadly weak U.S. dollar and domestic economic concerns. The Singapore dollar rose near one-week highs, buoyed as the U.S. dollar sustained losses against major currencies. But the South Korean won gapped down to its weakest level since March 20, hurt by weak economic data at home and political factors including the Iraq war and tensions with North Korea.
While most regionals stayed supported as the U.S. dollar weakened on worries about a longer and bloodier war in Iraq, some analysts said players would be cautious as they assess the damage to regional economies from a lengthy conflict. "Markets continue to struggle between fear and hope over the war in Iraq," said Philip Wee, treasury markets strategist at Singapore's DBS Bank. "The shadow of a longer-than-expected war has dimmed prospects for a quick global economic recovery," he added. After last week's grim data from the region and abroad, markets will seek more clues on the global outlook from key U.S. economic reports this week, including the March Institute of Supply Managers' indices, Chicago PMI and employment numbers and factory orders for February.
Jimmy Koh of UOB Bank in Singapore said players should also be cautious of the market turning net short of dollars against major currencies. "We suspect some consolidation in trading is in order unless there is a significant turn in events on the war front," he said.
KILLER FLU NOT YET PRICED
While having little impact on price action so far, dealers and analysts said the killer respiratory virus sweeping across the region could also dampen sentiment. On Saturday, United States health officials added Singapore to the list of Asian destinations -- China, Hong Kong and Hanoi -- that should be avoided by tourists and business travelers. Analysts feared concerns about the flu could hurt the region's multibillion dollar tourism industry. Still, the Singapore dollar was seen supported as mostly foreign names were spotted unwinding long U.S. dollar positions, hitting stop-loss sell dollar orders first at around 1.7685 and then close to the 1.7650 level.
That pushed the Sing dollar near one-week highs around 1.7644. The Thai baht was a tad firmer, but locked in a tight 42.90-42.935 per dollar range, with exporters and importers both out in force to cover their month-end requirements. Dealers said local corporates were spotted buying U.S. dollars and yen against the baht for debt repayments. The International Monetary Fund's announcement on Friday that it had approved a delayed release of a $469 million loan tranche for Indonesia had little impact on the rupiah . Dealers in Jakarta said the rupiah had already bounced off lows around 9,150 hit on March 20 was likely to stay within a narrow range around the 8,900 level with market focus on growing public resentment against the U.S.-led war in Iraq. Over 100,000 angry Indonesians were out on the streets of Jakarta on Sunday in one of the biggest protests in the world's most populous Muslim nation.
The Philippine peso was easier at around 53.62 per dollar although banks were still wary of building long dollar positions after eight of them were penalised by the authorities for violating regulations last week.//