Regional forex markets jolted by peso news<\/p>\n
SINGAPORE (Reuter): News the Philippines had caved into
\npressure and allowed the peso to find its own level reverberated
\naround Asian markets yesterday, prompting Indonesia to widen the
\nrupiah's trading band and a fresh Thai baht plunge.<\/p>\n
The peso's sharp depreciation on the news resulted in the
\nsecond de facto devaluation in the region this month, and with
\ntraders still jittery after Thailand's flotation of the baht it
\nimpacted on currencies around the region.<\/p>\n
While traders had been speculating over whether the peso could
\nhold up, the move to widen the band in which it is allowed to
\nmove came sooner than had been expected, as did Indonesia's
\nwidening of the rupiah's trading band.<\/p>\n
\"I don't think this was a real surprise considering the peso
\nhad been in a managed float in the first place,\" said Chiang Yao
\nChye, economist at CIBC Wood Gundy in Singapore.<\/p>\n
\"What has been surprising is how the managed float was
\ncontrolled, it has been more like a fixed rate up to now. We, and
\na lot of other people, expected the peso to depreciate by the end
\nof the year.\"<\/p>\n
Indonesia reacted to the Philippine move by widening its
\ndollar\/rupiah intervention band to 12 percent from 8 percent with
\nthe new range 2,374-2,678 to the dollar.<\/p>\n
Indonesia has a policy of managed depreciation for the rupiah
\nand the market has for some time been speculating that the
\nintervention band would be widened to allow more room to ease.<\/p>\n
The Indonesian rupiah had eased to 2,438.00 to the dollar from
\n2,432.00 on the peso news. After its own band was widened initial
\nquotes from the market were erratic between 2,420.00 and 2,433.00
\nbut it settled basically unchanged from levels before the news.<\/p>\n
The peso news hit dealing screens shortly after traders in
\nManila and Singapore arrived at their desks and the peso
\nimmediately plunged.<\/p>\n
In Manila it traded as low as 29.45 per U.S. dollar, over 10
\npercent down from the 26.40 level the Philippine central bank had
\nbeen aggressively defending since the baht crisis.<\/p>\n
It was not just the peso the suffered, the baht itself sagged
\nto a record low of 30.03 per U.S. dollar and the Malaysian
\nringgit slid to 2.5050 per dollar from 2.4900.<\/p>\n
\"After the Philippines decided to let the currency depreciate,
\neverybody was just trying to buy dollars against all the Asian
\ncurrencies,\" said one trader at leading U.S. money center bank in
\nSingapore.<\/p>\n
Baht trading has been highly nervous since the effective
\ndevaluation on July 2 and its plunge today came as negative
\nsentiment spilled over from the peso market with dealers noting
\nthat the U.S. dollar was well bid across South East Asia.<\/p>\n
The ringgit has been under the speculators' gaze for some time
\nnow and as with the peso the pressure built up after the Thai
\ncrisis. The Malaysian central bank, Bank Negara, has been
\nfighting hard to fend off selling by aggressive intervention and
\nby forcing interest rates higher.<\/p>\n
\"It is a battle, it is not really logical, it is not
\nrational,\" said Desmond Supple, head of Asian currency research
\nat BZW in Singapore.<\/p>\n
He said fundamentally Malaysia compares favorably with
\nThailand but in the current environment it is up to authorities
\nto force a clear-headed assessment of the risk\/reward on the
\nringgit.<\/p>\n
Trading in the peso was suspended in Manila today when the
\nsharp drop breached the 1-1\/2 percent volatility band of the
\nPhilippine Bankers Association (PBA).<\/p>\n
When trading in the peso gets underway next week the PBA said
\nit would not include today's sharply lower levels when
\ncalculating the day's weighted average.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/regional-forex-markets-jolted-by-peso-news-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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