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  • Feb 4th, 2005
  • Comments Off on Asian currencies firm ahead of Bushs peech, G7 meet
Asian currencies were steady on Thursday as traders refrained from placing new bets before hearing US President George W. Bush's State of the Union address and before the Group of Seven meeting this weekend. The US Federal Reserve's decision on Wednesday to raise benchmark interest rates by a quarter of a percentage point had little impact because the move was widely expected. The Fed also said it thought it could continue to raise rates at a measured pace, an outlook that did not come as a surprise to most analysts.

With the Fed decision out of the way, traders turned their sights to Bush's speech, which was due to begin at 0200 GMT, the US non-farm payrolls data and the outcome of the G7 meeting.

The events would help investors get a clearer view about the strength of the US economy and ascertain whether United States would keep up the pressure on China to revalue the yuan, said Sani Hamid, a currency analyst at 4CAST Ltd in Singapore.

"It's a wait-and-see attitude ahead of the G7 meeting," Hamid said. "People hope to hear something about China."

Many investors who had sold the dollar last year, expecting the US currency to weaken against the euro, yen and Asian currencies because of record US current account deficit, had to rewind their bets after the dollar rebounded this year on signs of a strengthening US economy.

"Having got burnt earlier, the market is finding its feet until it gets slightly clearer signs," Hamid said. "It's looking for new levels to short the dollar." Many analysts still expect the Thai baht, Philippine peso and the Indian rupee to lead gains in Asian currencies against the dollar as United States struggles to plug its record current account and budget deficits.

The peso, Asia's best performing currency this year, gained a quarter of a percent to 54.88 per dollar, close to Tuesday's 15-month high.

The deputy governor of the Philippines' central bank, Amando Tetangco, said on Wednesday the central bank expected the peso to gain further against the dollar if fiscal reforms were sustained, and expected inflation to fall as the currency strengthened.

The rupee posted a five-year closing peak on Wednesday after Standard & Poor's raised India's foreign currency debt rating by a notch, citing improved external finances and economic growth prospects.

Copyright Reuters, 2005


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