No rush to rethink ASEAN currencies despite slide<\/p>\n
SINGAPORE (Reuters): Unwelcome flashpoints on the region's
\npolitical horizons have triggered sharp falls in ASEAN currencies
\nin recent days but most analysts say there is no reason to panic.<\/p>\n
While they're keeping a wary eye on key support levels, most
\nsaid they were reluctant to cut their forecasts, especially for
\nthose currencies that had already been seen as holding more risk.<\/p>\n
\"People are focused on the political front especially in the
\nASEAN region but there's no talk of a crisis. I'm not overly
\nbearish on the peso or the rupiah as my expectations there
\nweren't good anyway,\" said Kevin Ralph, First Vice President of
\nStrategic Trading at Sanwa Bank Limited.<\/p>\n
A recent bomb blast outside Indonesia's attorney-general's
\noffice drove the rupiah to 16-month lows last week, while growing
\npessimism over the Philippines' economic and political outlook
\nsent the peso [PHP=] to 30-month troughs on Tuesday.<\/p>\n
Some worries about the domestic political scene and still high
\nnon-performing loans have also hurt the Thai baht, while the
\nSingapore dollar has been dragged lower alongside its regional
\ncounterparts.<\/p>\n
But analysts remained relatively upbeat about the fourth
\nquarter, expecting an economic slowdown in the U.S. to dampen the
\nappetite for U.S. dollars.<\/p>\n
And the Korean won and Taiwan dollar have been fairly immune
\nto the problems in Southeast Asia, thanks to greater confidence
\nin their political and economic outlook.<\/p>\n
The rupiah stands out as one currency analysts have
\nreconsidered, in the light of near 25 percent losses on the year.<\/p>\n
Citibank revised down its end-September rupiah target to 8,900
\nfrom 8,400 though it still sees the rupiah climbing back to 7,500
\nper dollar in the 12 months to June 2001.<\/p>\n
\"Our fundamental view for the rupiah is unaltered. We continue
\nto show the rupiah rallying post the August 'accountability'
\nmeeting,\" it said in a recent research note.<\/p>\n
Some analysts have said the rupiah is likely to trade in a
\n9,000 to 9,500 band ahead of the August legislature meeting at
\nwhich President Abdurrahman Wahid would be called on to account
\nfor his turbulent first year in power.<\/p>\n
Last month, Sanwa's Ralph cut his end-2000 rupiah forecast to
\n8,500 from 7,500 earlier.<\/p>\n
Standard Chartered said it was reviewing its third quarter
\nforecasts of 45.50 for the peso, 9,500 for the rupiah and 42.00
\nfor the baht.<\/p>\n
But analysts were cautious about tinkering with forecasts for
\nregional currencies other than the rupiah as thin trading
\nconditions have made for wild swings in recent sessions.<\/p>\n
\"We don't want to get too caught up in market activities
\nseeing the acceleration (in the peso) in the last few days,\" said
\nSteve Brice, treasury economist at Stanchart.<\/p>\n
\"The trend is clear but if we did revise the peso now it may
\nprove unwarranted as the dollar does look very overbought.\"<\/p>\n
SEB Merchant Banking Chief Analyst Chia Woon Khien said she
\nwas likely to cut her end-Q3 peso forecast to 46.00 from 45.00.<\/p>\n
But Thio Chin Loo, strategist at BNP Paribas, said she was
\nsticking to end-Q3 forecasts for 45 pesos, 40 baht and S$1.75
\nmade in the first half of the year.<\/p>\n
\"We've had low forecasts for regional currencies and our
\ntargets are quite achievable. Our end-Q3 8,500 forecast for the
\nrupiah is likely to hold despite mid-term pressure,\" she said.<\/p>\n
The relatively calm assessment of recent currency movements
\ncan partly be attributed to low expectations given the economic
\nfundamentals of certain countries.<\/p>\n
There are also doubts about the dollar's ability to remain the
\ncurrency of choice as the Federal Reserve tries to engineer a
\nsoft landing for the U.S. economy.<\/p>\n
\"Asian markets are only going one way at the moment with the
\nbias on the dollar. But we foresee dollar weakness across the
\nboard and especially against the yen after the third quarter,\"
\nsaid BNP Paribas' Thio.<\/p>\n
She said the dollar was likely to peak soon given a likely
\nU.S. move to hike rates for the last time this year in August.<\/p>\n
\"If high oil prices persist and U.S. asset prices remain
\nbuoyant, the U.S. may opt for a further 50 basis point hike in
\nAugust. This would increase the risk for a hard landing and weigh
\non the dollar.\"<\/p>\n
\"Something else that should help Asian currencies is future
\ninflows into Asia as money stops flowing into the U.S,\" she said.<\/p>",
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