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Won, pound latest stars of US$ slide

IT WAS the turn of the British pound and the Korean won to stand out in Asian currency trading yesterday, as the US dollar continued its slide to new multi-year lows in anticipation of another US interest rate cut. After the sharper-than-expected fall in US consumer confidence for October reported overnight, traders are fearful that more weak US data this week will further damage the already weak greenback. US jobs data for October are due out tomorrow evening.

The US currency eventually ended the day close to the day’s fresh post-depeg low of just above 7.46 yuan.

According to reports, this obliged the Hong Kong Monetary Authority to buy at least half a billion US dollars yesterday to stop the greenback from falling through the base of its allowed HK$7.75 to HK$7.85 range. Closer to home, meanwhile, the greenback was forced to fresh 10-year lows of S$1.4477 and 3.3375 Malaysian ringgit.

It was the Korean won which recorded the day’s largest 0.7 per cent gain versus the falling US dollar. It ended the day at 900.7 won per US dollar despite warning grumbles from the Korean central bank – just about recovering all of the losses it has suffered versus the latter since the 1997-98 Asian crisis.

More sharp gains could now be in store for the won, suggested DBS researchers yesterday, citing its tendency to make periodic spurts to the upside, and other supporting statistics by way of strong surpluses, a red-hot stock market, and interest rates higher than that for the US dollar. ‘Taking a conservative stance, we estimate the present period of won appreciation (which began with the US dollar at 950 won on Aug 17) could amount to 10 per cent or more, still less than the 13-15 per cent gains seen in previous episodes,’ they said. ‘This would put the won at around 850 per dollar by end-08.’

On our charts, that forecast is supported by the breakdown of what chartists would call a double-top formation, formed by the US dollar’s two 752 won peaks in March and August this year. For as long as the US currency is capped below the 912 to 913 won area, this opens up an eventual downside objective of at least 870 won.

Elsewhere in Asian trading, a trio of European favourites also probed fresh highs. A stronger-thanexpected spurt in October house prices in the UK propelled the pound to a 23-year high of US$2.0743 yesterday. Likewise, hawkish remarks from the European front overnight boosted the euro to a fresh postlaunch high of US$1.4467 yesterday, and pressed the greenback half a per cent lower even against the lowyield Swiss franc, to end at 1.1598 francs – its weakest showing since March 2005.

Down Under, traders reported fresh interest to sell the yen versus the Australian dollar in preference to the higher-yielding New Zealand dollar – citing more strong housing and credit data out of Australia, and the possibility of a larger than expected US interest rate cut overnight.

By the Asian close, the Australian dollar had advanced a further 0.2, 0.3 and 0.6 per cent to finish at S $1.3363, 92.27 US cents and 106.25 yen respectively.

 

Source: Business Times 1 Nov 07

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