FWIW,
Asian markets rally; U.S. dollar falls against major currencies
5.38 p.m. ET (2138 GMT) September 7, 1998
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Asian stock markets rallied Monday with traders crediting everything from Japan's strengthening yen to speculation about lower U.S. interest rates and new market controls imposed by Malaysia and Hong Kong.
Elsewhere, the dollar fell to its lowest level against the Deutsche mark since November and trading in U.S. dollars was canceled on Moscow's interbank currency exchange because people only wanted to buy dollars, not sell them.
In Mexico, the peso closed weaker, setting a third consecutive record low. Stocks closed higher, buoyed by positive performances in other emerging markets.
The peso closed at a midrate of 10.26 to the dollar, down from Friday's close of 10.22. Traders said the low volume of trade because of the Labor Day holiday in the United States exaggerated the peso's movements.
In Japan, the yen reached a four-month high, of 131.99, against the U.S. dollar. Investors were reacting to Friday's hint from Federal Reserve Chairman Alan Greenspan that interest rates might be cut to keep the U.S. economy from a recession.
A rate cut would mean investors won't earn the kinds of returns they are now in U.S. assets, and so some were looking to take their money elsewhere.
Also in Tokyo, the Nikkei Stock Average surged 747.15 points, the second biggest point gain this year, to close at 14,790.06, an increase of 5.32 percent.
Japanese stocks rose on reports that a compromise was being worked out between the ruling party and opposition lawmakers over efforts to reform Japan's debt-ridden banks. Such a move could benefit the rest of troubled Asia, given the big role that Japan plays as the region's key lender.
The twin gains by Japan's currency and stocks offered a brief glimmer of hope, but traders were quick to say that it was too early for optimism about a sustained rally in the world's second-largest financial markets. Economic growth remains stagnant, and consumer spending shows no sign of recovery.
"The fundamentals haven't changed, but sentiment has,'' said Ryohei Muramatsu, treasury manager at Commerzbank in Tokyo.
And as good as the Nikkei was, Hong Kong's benchmark Hang Seng Index ended at a six-week high, finishing up 7.9 percent to 8,076.76.
In Hong Kong, new measures were announced over the weekend and Monday to strengthen the currency board system and to reign in illegal speculation on the territory's stock and futures markets. That boosted bank liquidity, cut interest rates sharply, and buoyed investors' confidence, analysts said.
In Singapore, the Straits Times Index closed at 862.10, a 7 percent increase, its best performance this year. In Thailand, the SET index surged 6 percent to 220.56 points.
And in Malaysia, the Composite Index did the best of all, closing 22.5 percent, or 81.62 points, higher at 445.06.
Last week, the Kuala Lumpur Stock Exchange announced restrictions on stock transactions, which effectively banned trading in its shares outside the country. Some accused the government of manipulating the market.
While foreign investors are mostly sidelined by uncertainties, Malaysian investment funds, corporations and stock market traders are taking advantage of what they see as a domestic rally.
Foreigners holding stocks here are uncertain about last week's measures. The government imposed currency controls and decreed that investors cannot take money out of Malaysia before September 1999.
In addition, the central bank's announcement Monday that effective Sept. 16, it would cut the statutory reserve requirement to 4 percent from 6 percent was seen as positive for the Malaysian market. The move will effectively release billions of ringgit into the financial system.
Whether the momentum in Asia can last remains to be seen.
"With a threat of a rate cut in the U.S., Asian markets are suddenly attractive again for investors, but possibly only for the near term,'' said Noel Reyes, research head at Anscor Hagedorn Securities Inc., in Manila, Philippines, where the market finished 2.3 percent higher.
"Unless the Fed does cut its rate, this rally won't be sustainable,'' he said.
On Moscow's interbank currency exchange, trading in U.S. dollars was canceled. The Central Bank set the official rate at 18.9, down sharply from 17 on Friday. Street exchange points remained open and were offering to buy dollars at around 20 to 22 rubles.
The Communist-led lower house of parliament again failed to approve President Boris Yeltsin's candidate for prime minister and voted against Viktor Chernomyrdin for a second time on Monda. If the Duma once again rejects his candidate, Yeltsin must dissolve parliament and call new elections.
In addition, Central Bank of Russia Chairman Sergei Dubinin submitted his letter of resignation.
In European trading, the U.S. dollar fell against other major currencies.
Dollar rates in London compared with late Friday included 1.7250 German marks, down from 1.7312, 1.4096 Swiss francs, down from 1.4217, 5.7812 French francs, down from 5.8014, 1.9470 Dutch guilders, down from 1.9534, 1,702.42 Italian lire, down from 1,709.29, 1.5224 Canadian dollars, down from 1.5318.
The British pound was quoted at $1.6660, down from $1.6730. |
