Taiwan Stock Discussion

[Stock]

Emerging Asia FX-Weaker as U.S. seen raising rates
SINGAPORE, June 7 (Reuters) - Asian currencies weakened across the board on Wednesday for the second straight day as traders factored in higher chances for a U.S. rate increase this month following hawkish comments by Federal Reserve officials.
The South Korean won lost as much as three-quarters of a percent to 950.0 per dollar after local financial markets reopened following a holiday on Tuesday.

The Singapore dollar fell as much as 0.4 percent to 1.5835 per dollar and the Malaysian ringgit fell to a six-week low of 3.6535 per dollar.

The Philippine peso traded as low as 52.94 per dollar, close to last week's four-month low of 52.98 while the Indonesian rupiah fell to a two-week low of 9,392 per dollar.

Analysts said Fed Chairman Ben Bernanke's speech on Monday, when he cautioned against relaxing the central bank's vigil against inflationary pressures despite slowing U.S. growth, pointed to another rate increase, bolstering the dollar.

U.S. interest rate futures have risen this week following comments by Bernanke and other Fed officials on Tuesday.

Many investors were earlier confused as to whether the Fed would pause a two-year rate-rising spree at a meeting later this month due to the slowing economy.

"We got a bit more clarity on the Fed front after Bernanke's speech. That's why the dollar has strengthened," said Thomas Lam, treasury economist at United Overseas Bank in Singapore.

"The risks are definitely skewed towards a 25 basis point increase in June."

Rising U.S. interest rates have been one of the key factors behind the dollar's revival against Asian currencies since 2005 as higher U.S. rates made U.S. short-term deposits more attractive compared with riskier emerging market assets.

Lam said investors have been holding the biggest net short dollar positions since late 2004. That increased the risk of a sharp dollar surge against Asian and major currencies in the event the Fed decided to continue raising interest rates.

But Lam expects the dollar to weaken over the medium term as the U.S. economy slows and the Fed halts raising rates.

"Eventually the Fed will have to pause while the European Central Bank and Bank of Japan will hike interest rates and China will make the yuan more flexible."

China's central bank governor, Zhou Xiaochuan, reiterated the country's position this week when he said the process of making the yuan a fully convertible currency would be gradual.

Offshore non-deliverable forward markets priced the yuan at 7.7240 per dollar in a year's time, suggesting a 3.8 percent appreciation. But the bets on one-year yuan forwards have been pared back from 7.6650 per dollar in May.

THAI RATES MEETING

The Thai baht lost as much as half a percent to 38.33 ahead of a central bank meeting that is expected to raise the key interest rate for the 13th time since August 2004.

But Singapore's DBS Bank said it expected the Bank of Thailand to hold the benchmark rate steady at 4.75 percent.

"We believe growth concerns will dominate in the (BOT's) policy decision, as inflation will slow down in the second half of the year," DBS said in a note.

The Taiwan dollar fell to a six-week low of 32.195
per dollar. Analysts said apart from the strengthening U.S.
dollar, the Taiwan currency was additionally pressured by
political uncertainties surrounding President Chen Shui-bian
which has led to a sell-off in local stocks. CURRENCIES VS U.S.
DOLLAR Change on the day at 0256 GMT

 Currency    Latest bid   Previous day    Pct Move 
  Japan yen       113.09         112.21       -0.78 
  Sing dlr        1.5822         1.5769       -0.33 
  Taiwan dlr      32.148         32.062       -0.27 
  Korean won      947.20         943.00       -0.44 
  Baht             38.29          38.14       -0.38 
  Peso             52.88          52.84       -0.08 
  Rupiah         9363.00        9343.00       -0.21 
  Ringgit         3.6515         3.6430       -0.23 
  Yuan            8.0165         8.0144       -0.03  
 . 
 Change so far in 2006 
  Currency    Latest bid  End prev year    Pct Move 
  Japan yen       113.09         117.96       +4.31 
  Sing dlr        1.5822         1.6625       +5.08 
  Taiwan dlr      32.148         32.850       +2.18 
  Korean won      947.20        1011.60       +6.80 
  Baht             38.29          41.11       +7.38 
  Peso             52.88          53.09       +0.40 
  Rupiah         9363.00        9835.00       +5.04 
  Rupee            45.91          45.04       -1.90 
  Ringgit         3.6515         3.7790       +3.49 
  Yuan            8.0165         8.0702       +0.67