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South Asia Daily Outlook and Strategy - November 23, 2007

Leslie Khoo, [email protected],

Ph: 65-6236-394

Vishnu Varathan, [email protected],

Ph: 65-6236-0396

Kwok Yung Chua, [email protected],

Ph: 65-6236-0385

* USD/SGD: Contentment inside range

USD/SGD was involved in choppy trades in the Asian session as prices tracked the whimsical movements of the stock market. Early morning excitement came in the form of news that Dubai's ruler, Sheikh Mohammed bin Rashid Al Maktoum has plans to acquire stakes in Singapore Telecommunications and DBS Group Holdings with his private investment arm, Dubai International Capital (DIC). That probably halted the USD/SGD upside momentum from its overnight climb. A mini recovery in stocks took USD/SGD down below the 1.45 mark although late afternoon selling saw the unit pulling back up. Further to the upcoming session, expect further consolidation inside the familiar range of 1.445-1.455. USD/CNY's hitting another fresh post revaluation lows and the weak USD should likely weigh on the unit. However expect continued stock woes to fuel buying interests.

* USD/PHP: Resigned to consolidation amid Cross/JPY volatility and caution

USD/PHP closed the session at 43.19, appreciably softer than the opening 43.40 levels. Bulls were off to a roaring start on the back of US equity market weakness on Wed night as the pairing reached intraday highs of 43.45 after popping 13pips higher. Focus however shifted to downside on JPY crosses easing and the dollar's tumble overnight setting the stage for profit-taking after initial rallies in the USD/PHP. FirstGen and Iceland's Reykjavik Energy making an of PHP58.5 bln ($1.35 bln) for a 60% stake in PNOC-EDC was also seen to have added to the weight in the USD/PHP. Intraday lows of 43.16 were printed but cautious bids surfaced at these levels. For now, we expect that the USD/PHP will continue to consolidate in the 43.05-43.55 range amid volatile price action in coming sessions. JPY crosses and equity market cues are seen being the dominant influence on USD/PHP trade. Market shave showed that with risk aversion lingering, a softer dollar need not necessarily translate into downside in the USD/PHP. Further upside risk in crude oil prices should also be a key watch factor for mar kets.

* USD/THB: Range of 33.80-33.90 to hold

USD/THB was held in steady trades in the onshore market, though some downside-biased trades. The currency pair was stretched by exporters at one end and the central bank at the other. Going forward, the onshore trades are likely to gear towards the upside, as we expect risk aversion to remain in the limelight, and range of 33.80-33.90 is expected to hold. However, gain in USD/THB will continue to be capped by exporters. We believe the authorities want to maintain a stable THB, unlike its regional counterparts which responds to the volatility of the global currency markets. In Thailand context, THB stability is essential not only to the economy but also to the political arena. Thailand will hold a general election in December, as a move to return power to a civilian government. Managing the economy and financial markets well will likely help the military-backed candidates obtain more votes in the poll.

* USD/IDR: Fears keep the pairing in familiar territory

USD/IDR gapped above the 9400 level in opening session as the tumble in US equity markets on Wed night highlighted the nervy state of financial markets. Fears of another round of liquidation in Indonesian assets exerted initial upward pressure on the USD/IDR. Heights of 9440 were reached before the bounce in JPY crosses saw the local bourse clawing back losses to climb into positive territory. This created room for the USD/IDR to ease below the 9400 level. Intraday lows of 9375 were done with the USD/IDR being indicated at 9385-9395 last. In coming sessions expect that focus will continue to be Cross/JPY gyrations as well as equity and bond flows. Whether the dollar is softer of firmer will be of a lesser concern to the markets while jitters continue to reverberate through. The central bank is, as has been the case in recent sessions, expected to smooth volatility above. Meanwhile range of 9335-9445 is seen to be the USD/IDR's playground while fresh cues are awaited. Surging crude prices, another focal point of markets prompted, Energy and Mineral Resources Minister, Purnomo Yusgiantoro to warn that raising fuel prices will have high political costs.

* USD/MYR: Likely to test 3.3950 resistance

USD/MYR edged higher after falling from to a low of 3.3770 in late trades on Thursday, as the downside risk was limited by losses in the local bourse. The equity benchmark KLCI tumbled 1.15% to end at 1344.16. The currency pair was lifted in early dealings by risk aversion, but only to be brought down by buying in JPY crosses later. In coming sessions, market sentiment will still be clouded by risk aversion as market expects more sub-prime related losses to be unveiled. This basically suggests that upside tendency of USD/MYR remains intact. Given the present market condition, we uphold the possibility that USD/MYR will likely test the 3.3950 resistance, which is a tough nut to crack according to our technical analysis. Breaking the barrier will expose the 3.4000-3.4050 resistance region. Meanwhile, on the downside, we see supporting fences at the 3.3650-3.3700 zone.

* USD/INR: Upside exposed by the extended tumble in equities

USD/INR hoped above the 39.40 level in opening trades as the toll from consecutive losses on the local bourse, coupled with the plunge in JPY crosses and weak US equity markets took the bears out of the playing field. The pairing remained on a fairly short leash with an upward bias, trading in the 39.40-39.465 range as at the point of writing. Continued slippage on the SENSEX amid jittery sentiments and prohibitively high crude prices pressured the pairing from below, more than offsetting the softening effect of the record lows in the dollar against the EUR. Central bank fears also kept the USD/INR on a firm footing. RBI Deputy Gov Rakesh Mohan said that the central bank actively intervenes in the currency market - something that markets must be acutely aware of. He added that while the central bank left the market to its own mechanism by and far, it will intervene if necessary. RBI made it clear that demands of the monetary situation took priority and that SLR instruments will be used as necessary. Expect that the USD/INR will be traded in the 39.30-39.60 range for now as focus remains keenly on the equity mkt. In the next 3 years' Dubai's Damac properties plan to pump $5 bln in to the Indian property market.

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