Murmurs of Asian Currency Intervention

Ah yes, Asian central bank intervention. With the US dollar renewing its swoon (cue the hyperventilating headlines), the newswires are agog with rumours that the usual central bank suspects are back in the game. Dow Jones for instance says South Korea has bought somewhere between one half and a billion dollars:

The South Korean won ended a touch lower Wednesday on suspected central bank intervention, shedding its gains earlier in the session. The won was up 0.3% in early trade as major currencies like the euro remain well bid against the greenback, with the euro-zone currency trading above the $1.4700 resistance.

Traders said the Bank of Korea may have intervened again to buy dollars throughout the session to curb the won's gains. Some traders estimated the central bank likely bought between $500 million and $1 billion, in an attempt to keep the dollar above KRW1,170. "Authorities have succeeded in keeping the dollar above KRW1,170 for four straight sessions now. We will have to see how long this will last," said a foreign bank trader.

Reuters chips in by saying Singapore, Thailand, and Taiwan have been busy trying to stem gains in their currencies:

The baht fell to 33.45 per dollar from Tuesday's close of 33.33, the highest since July 2008, on suspected central bank intervention. "It looks like the Bank of Thailand has been in the market to restrain baht gains. It's a power play with the baht being caught between BoT and sustained foreign inflows into the Thai stock market," a dealer at a Thai bank said.

Central banks in South Korea, Thailand and Taiwan have intervened more aggressively than their regional peers in recent weeks to curb the rise in their currencies, traders say...

Singapore dollar SGD= eased to 1.4047/USD after hitting as high as 1.3989 late Tuesday, when it broke the 1.4 level for the first time since Aug. 8, 2008. "It was rumoured that the authority was in (the market) after U.S. dollar/Singapore dollar fell below 1.4, so the market is buying back U.S. dollars," said a Singapore-based trader, adding that a softer euro also weighed on sentiment. The Singapore dollar has gained 11 percent against the U.S. dollar since March, fanning speculation that the central bank will intervene to temper its rise.

Old habits are hard to break, I guess. So much for creating domestic demand and relying less on export markets. Most of us are still waiting for Goliath to get in the game, though. Everybody's been reading the tea leaves of when Japan will intervene as exporting industries there are currently being hammered by the mighty yen. (I'll try to post more on the conundrum facing Japanese authorities in following the path rumoured to have been taken by other East Asian economies.)

8/10 UPDATE: The Wall Street Journal has an article outlining the estimated extent of Asian economies buying up greenbacks. Toss in the Philippines and the peg-defending Hong Kong Monetary Authority into the action:

Traders in Seoul said they suspected the Bank of Korea, which has intervened heavily in recent weeks to curb won strength, bought up to US$1 billion at around 1,167 won. The U.S. currency last traded at 1,166 won, down from 1,170.50 won at the end of domestic trading Wednesday.

Bank Indonesia was suspected of buying up to $350 million around 9,370-9,380 rupiah via state banks to slow the rupiah's rise, according to traders in Jakarta. "They weren't buying yesterday but today they're not comfortable with the quick appreciation in the rupiah, and they're buying massively," said a senior dealer. Following the intervention, the dollar came off its 9,370 rupiah intraday low. It recently traded at 9,390 rupiah around, but was still down from its close Wednesday at 9,430 rupiah.

In Manila, the Philippines' central bank bought around $100 million at 46.46 pesos to 46.50 pesos, according to traders. The dollar was last at 46.40 pesos.

Taiwan's central bank was spotted buying U.S. dollars early in the session after the local currency settled at its highest level against the U.S. unit in more than a year, traders said. The U.S. dollar was recently trading at 32.133 New Taiwan dollars, lower than Wednesday's close of NT$32.180, but off its opening low of NT$32.098. Traders said if the U.S. dollar drops below NT$32.100 during the session, NT$32.000 remains a pretty strong support level in the near term.

The Hong Kong Monetary Authority said it sold 3.88 billion Hong Kong dollars in the foreign-exchange market to defend the Hong Kong dollar's peg to the U.S. dollar. Thursday's intervention, the second this week, was triggered by the U.S. currency hitting HK$7.7500, the strong side of the Hong Kong dollar's trading band. The U.S. dollar was trading at HK$7.7501. Under Hong Kong's currency board system, the Hong Kong dollar is pegged at 7.80 to the U.S. dollar, but is allowed to trade between HK$7.75 and HK$7.85.