International | May 19 2006
By Robert Rudnicki
Asian currencies have taken a significant hit over the past week, and in the opinion of DBS analysts Philip Wee, a consolidation rather than a rapid bounce back is on the cards.
Worst hit was the Indonesian rupiah, which fell 4.5%, but the Korean, Taiwanese, Philippine, Malaysian and Thai currencies all also headed southwards.
The break in the recent sell off in US dollars came about as a result of renewed inflationary fears in the US, which make a Fed interest rate rise in June more likely.
The market was also affected by the sharp commodities sell off and concerns in Latin America, Wee says.
With the European summer and the World Cup rapidly approaching, Wee predicts liquidity is likely to be thin and therefore doesn’t discount the possibility of a near term consolidation.
However, further down the line Wee believes the US dollar will continue to weaken, in line with the view of most other experts.
