Asia currency speculation hits exchange houses

Local currency exchanges have been hit by speculating on East Asian currencies that they bought at low prices, expecting them to rise after the SARS epidemic.

But as the SARS epidemic faded, the currencies did not rise, leaving the exchanges suffering substantial losses, according to exchange sources.

Though not many exchange houses were prepared to admit their losses in the process, it is said that some exchange houses were trapped into buying huge quantities of East Asian currencies in order to benefit from their low prices and sell them after the end of the impact of SARS.

This is said to have also driven a few exchange houses to stop buying any more currencies and focus on selling what they have.

"Exchanges have lost their bet on these currencies, particularly as China, Thailand and Hong Kong were not declared free of SARS by WHO. The Singapore dollar rose slightly after WHO declared the country free of the epidemic and the recent Singapore carrier's favourable offers," the sources said.

"The losses were partly attributed to other factors related to economic performance besides SARS, especially in the Singapore dollar and the baht of Thailand, said Hamdi Al Mahallawi of Al Ghurair Exchange.

He added the situation of the Malaysian ringgit, Hong Kong dollar and the Chinese renminbi has improved because they are pegged to the U.S. dollar.

The exchange rates of currencies of major tourist destinations such as Europe, the UK, Australia, Canada, and India have gone up considerably this summer based on exchange rates quoted yesterday in the money exchange market in the UAE compared with the rates during the same period last year.

For summer travellers from the UAE, this means that their holidays will be more expensive this season compared to last year.

The exchange rates of major non-U.S. currencies have gone upthis summernot because of excellent performance of their respective economies but by default due to the depreciation of the dollar which is very unfortunate for many outbound summer travellers from the UAE," said Niyaz Ali, UAE Manager of Thomas Cook Al Rostamani Exchange Company.

"We are observing a higher demand for U.S. cash this season as a majority of travellers are preferring the dollar as it is sold at the same rate as last year and buyers are hoping that it will appreciate. We have to wait and see whether the gamble which they are taking will work or not," added Ali.