By Lilian Karunungan and Patricia Lui
Jan. 21 (Bloomberg) -- The Singapore dollar, Indonesian rupiah and South Korean won reversed declines on speculation their central banks intervened to support the currencies as the world faces a prolonged recession.
Singapore’s currency snapped a two-day loss after the central bank said there’s no reason for a persistent weakening in the local dollar, quelling speculation it would adopt such a bias before an April review as the economy shrank for a third quarter. The Korea Development Institute today cut its 2009 growth forecast to 0.7 percent, from a November estimate of 3.3 percent, and predicted a contraction for the nation in the first half.
“The Singapore dollar recovered on suspected central bank intervention,” said Joanna Tan, a regional economist at Forecast Pte in Singapore. “The currency was also given a boost by the central bank comments that there was no policy change and they are not bringing forward the April meeting.”
Singapore’s dollar traded at S$1.5064 to the U.S. currency as of 12:53 p.m. local time from S$1.5073 yesterday, according to data compiled by Bloomberg. It fell as much as 0.3 percent to S$1.5120, the weakest level since Dec. 8. The rupiah was at 11,272, after touching 11,372, the lowest since Dec. 17. The won advanced 0.5 percent to 1,367.55.
Bank Indonesia may have sold dollars at 11,270, according to Lindawati Susanto, head of currency trading at PT Bank Resona Perdania in Jakarta. Bank of Korea “managed the won today,” said Kim Yule, a dealer with BNP Paribas in Seoul.
Central banks intervene by arranging purchases or sales of foreign exchange.
Policy Stance
Singapore’s monetary policy stance for no appreciation in the currency remains intact and it will keep to its half-yearly policy announcement schedule, Monetary Authority of Singapore Deputy Managing Director Ong Chong Tee told reporters in Singapore today.
The currency earlier fell after the government forecast an economic contraction of much as 5 percent this year. Gross domestic product declined an annualized 16.9 percent last quarter from the previous three months, after shrinking a revised 5.1 percent between July and September, the trade ministry said today.
“It’s a near certainty now that they will move towards a weaker currency policy stance come April,” said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong. “The question now is if they will opt for a one-off depreciation in addition to the weaker currency stance, the opposite of what they did last April.”
Region’s Bellwether
The yen fell, reversing a gain, on speculation an increase in U.S. stock futures will give investors more confidence to buy higher-yielding assets funded in the Japanese currency.
The yen dropped to 89.97 versus the dollar in Tokyo from 89.76 late in New York yesterday. It earlier rose as high as 89.69. Japan’s currency dropped to 116.90 per euro from 115.85 late yesterday, after touching 115.30.
Malaysia’s ringgit traded at the lowest level in six weeks on concern economic growth will falter after Singapore, its biggest trading partner, reported its GDP forecast.
“Singapore is a bellwether in the region and the signs are quite grim for regional economies and currencies,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.
The ringgit fell as much as 0.4 percent to 3.6258 per U.S. dollar before trading at 3.6112 in Kuala Lumpur, according to data compiled by Bloomberg.
Bank Negara Malaysia will reduce its overnight rate to 2.75 percent from 3.25 percent today, according to 12 of 19 economists in a Bloomberg News survey. The nation’s exports slumped 4.9 percent in November, the most since February 2002.
Elsewhere, the Philippine peso rose 0.1 percent to 47.425 against the U.S. currency. The Thai baht was little changed at 34.96 and Vietnam’s dong was unchanged at 17,480.50.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Patricia Lui in Singapore at plui4@bloomberg.net
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