Published October 9, 2008

Yen effect batters A$ below Sing $

Aussie ends day at 96.17 S'pore cents; NZ dollar also hits six-year-low

By LARRY WEE
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(SINGAPORE) The currency clock was turned back several years yesterday as the Australian dollar traded below par against its Singapore counterpart - a situation not seen since January 2003.

In fact, by the Asian close, the Australian dollar traded at a six-year low of 96.17 Singapore cents. As recently as November 2007, the currency was riding high at S$1.36.

It was not the only higher-risk currency to be battered as the New Zealand dollar also fell 6 per cent in Singapore dollar terms, sliding to 86.76 Singapore cents by yesterday evening - another six-year low.

The yen on the other hand called the shots all through the Asian session, surging strongly as Japanese investors scrambled to unload their overseas investments in a hurry - especially with Japan's Nikkei stock index falling more than 9 per cent yesterday.

This forced the US dollar sharply back below 100 yen for the first time in six months, and once again inflicting bloody punishment on the Australian (Aussie) and New Zealand dollars (or Kiwi). In Singapore dollar terms, the Japanese currency jumped more than 2 per cent to finish the day at a three-year high of S$1.4884 per 100 yen.

Versus the yen, the Aussie and Kiwi plunged even more sharply to finish the day more than 12 and 9 per cent weaker respectively - for a cumulative loss of something like 25 per cent and 18 per cent against the yen in the space of just three short sessions this week.

Elsewhere, Asian stock markets tumbled as much as 10 per cent in response to another Wall Street slide of more than 5 per cent on Tuesday evening. And, as a result, the US dollar was also able to post fresh 2008 highs against Asian currencies like the South Korean won as well as the Singapore dollar, Malaysian ringgit, Indian rupee and Philippine peso.

While the US dollar closed the session a hefty 2.9 per cent worse off at 98.8 yen, it also surged almost 5 per cent to 1,394 South Korean won, 1.2 per cent to 48.69 rupees and 0.9 per cent to 47.76 pesos. Closer to home, the greenback ended a more modest 0.2 to 0.4 per cent higher at S$1.4705, RM3.4980, 34.55 baht and 9,600 rupiah.

Looking ahead, researchers at Standard Chartered Bank warned of no quick recovery before the second half of next year for Asian assets: 'At that time, foreign investors may begin to see good value in Asian markets - anticipating that although Asia ex-Japan is not decoupled from the global slowdown, it is certainty much better insulated than earlier due to stronger domestic demand and the presence of economic powerhouses such as China and India.'

US stocks tumbled on Tuesday despite supportive news from the US Federal Reserve, which announced a Commercial Paper Funding Facility or CPFF that will buy the commercial paper of US corporations through a special-purpose vehicle - and thus help them tide over any short- term liquidity shortfall caused by the unwillingness of US banks to lend.

The coordinated rate cuts by central banks from several countries were announced after the Asian closing.

By then, gold was regaining some shine as a refuge destination, and the euro, British pound and Swiss franc also managed to close with some gains versus the US dollar - at US$1.3629, US$1.7447 and 1.1321 francs per US dollar respectively.