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Emerging Asia FX-Baht, Sing dollar at multi-year highs

Written by: Staff

SINGAPORE, Apr 17 (Reuters) The Singapore dollar hit a nearly 8-year high and the Thai baht jumped to its strongest level in 6 years on Monday as Asian currencies joined the yen's rally against the dollar after a newspaper article suggested U.S. rates may not rise much further.

Trade was thinned by holidays in Hong Kong, Australia and New Zealand. The yen rose more than half a percent against the dollar from Friday's lows, inspiring similar gains in the baht and the South Korean won Rising Korean stocks, which briefly hit a record high, also buoyed the won to levels around 954 per dollar.

The Singapore dollar struck 1.6010 per U.S. dollar, its strongest since June 1998, before paring some gains.

The currency had been rising for almost 2 months on the expectation the Monetary Authority of Singapore (MAS) would tighten policy at last week's semi-annual review. It slipped after the MAS stuck to a 2-year policy that allows a gradual appreciation in the trade-weighted currency.

''It continues to appreciate even though policy has not been tightened. Which means our assumption -- that the policy framework allows a 1.5 percent annual appreciation and has a 2 percent band on either side -- most be wrong,'' said Nizam Idris, a currency strategist with IDEAglobal.

The MAS uses the currency as its policy tool, and conducts monetary policy by steering the Singapore dollar within an undisclosed trade-weighted band against a basket of currencies.

Analysts have their own estimates for these bands.

Idris said the Sing dollar's rise since last Tuesday's surprise policy decision hinted that the current policy permitted it to have a wider band and a steeper appreciation than most analysts had forecast.

''There seems to be more upside to the currency than our models are suggesting, and the market is trying to test those boundaries,'' he said.

The regionals also drew support from expectations the yuan would be bid ahead of Chinese President Hu Jintao's visit to Washington this week, just in case there were any statements from U.S. politicians or Hu on the yuan's outlook.

''While we expect no changes to the current yuan framework or discretionary revaluation on dollar/yuan, yuan-related comments will likely be tracked under heightened scrutiny by the market,'' analysts at JPMorgan said in a note.

BAHT TECHNICALS The baht was quoted in a 37.92-37.98 per dollar range for most of the day, after a brief spike to a 6-year high of 37.87.

Traders said the baht's gains were also due to bunched foreign currency inflows hitting the market after a long weekend that included holidays on Thursday and Friday.

Chatchawan Jumruswittayawong, head of currency trading at Bank of Ayudhya in Bangkok, said the baht's move was technically driven. Traders were waiting for it to rise to levels stronger than 37.90, which would confirm that the rally past 38 was sustainable and push the currency towards 37.50, he said.

Worries about the political situation had taken a back seat for now. The April 2 general elections called by Prime Minister Thaksin Shinawatra were boycotted by the opposition.

By-elections called for April 23 may not fill the gaps, which would still leave parliament short of the 500 seats it needs.

''We will see on May 2 whether parliament can be open or not,'' Chatchawan said. CURRENCIES VS U.S. DOLLAR Change on the day at 0824 GMT Currency Latest bid Previous day Pct Move Japan yen 118.26 118.68 +0.36 Sing dlr 1.6038 1.6080 +0.26 Taiwan dlr 32.456 32.490 +0.10 Korean won 955.70 961.50 +0.61 Baht 37.92 38.14 +0.58 Peso 51.34 51.33 -0.02 Rupiah 8985.00 8985.00 +0.00 Rupee 45.10 45.16 +0.14 Ringgit 3.6690 3.6710 +0.05 Yuan 8.0174 8.0180 +0.01 Change so far in 2006 Currency Latest bid End prev year Pct Move Japan yen 118.26 117.96 -0.25 Sing dlr 1.6038 1.6625 +3.66 Taiwan dlr 32.456 32.850 +1.21 Korean won 955.70 1011.60 +5.85 Baht 37.92 41.11 +8.41 Peso 51.34 53.09 +3.41 Rupiah 8985.00 9835.00 +9.46 Rupee 45.10 45.04 -0.12 Ringgit 3.6690 3.7790 +3.00 Yuan 8.0174 8.0702 +0.66 REUTERS CS DS1555

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