Dollar slips in Asia on subprime worries

Dollar slips in Asia on subprime worries


Tokyo: The dollar fell back against the euro in Asian trade Friday, 21 December, as news of a big loss at investment bank Bear Stearns prompted fresh concern about the fallout from the US subprime loan crisis, dealers said.

The euro rose to 1.4358 dollars in Tokyo afternoon trade from 1.4320 in New York late Thursday.

The dollar was steady at 113.07 yen from 113.09 while the euro climbed to 162.34 yen from 161.98.

Worries about the health of major US banks weighed on the greenback, dealers said.

“Investors sold the dollar after the bad earnings report of Bear Stearns and a fall in the Philadelphia December business index to the lowest since 2003," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

Bear Stearns posted its first-ever quarterly loss of $854 million and a larger-than-expected $1.9 billion write-down due to exposure to the subprime loan crisis.

The world’s largest bond insurer MBIA also disclosed its has a $30.6 billion exposure to collaterised debt obligations (CDO) — which are generally asset-backed securities — an amount eclipsing its net worth.

This suggests “that bad news on credit would likely continue into the first quarter of 2008," NAB Capital strategist John Kyriakopoulos wrote in a research note.

Meanwhile, the Philadelphia Federal Reserve Bank on Thursday said its factory activity index plunged to minus 5.7 from 8.2 in November, the lowest level in four years.

Dealers said the market was sensitive to negative news in thin trade ahead of the Christmas and year-end holidays.

Investors were looking ahead to another loan auction by the US Federal Reserve later in the day as part of efforts to encourage banks to borrow.

They were also digesting the Chinese central bank’s move to hike interest rates Thursday for the sixth time this year as it strives to curb rising inflation and stop the economy from overheating.

“The interest hike will no doubt fuel expectations that China will allow a faster rate of currency appreciation, which tends to support the yen," wrote Kyriakopoulos.

The dollar was lower against most regional Asian currencies. It slipped to 1.4590 Singapore dollars in late Asian trade from 1.4614 a day earlier, to 30.56 Thai baht from 30.68 and to 941.75 South Korean won from 943.50.

The greenback declined to 32.48 Taiwan dollars from 32.53 and to 41.69 Philippine pesos from 41.75, but edged up to 9,430 Indonesian rupiah from 9,425.