Rupiah down after highly volatile session<\/p>\n
HONG KONG (Dow Jones): The rupiah ended Asian hours weaker on
\nThursday after a highly volatile session, which saw the
\nIndonesian currency swing by over 5 percent in value during the
\nday.<\/p>\n
Asia's other regional currencies remained tightly range-bound.
\nOnly the Philippine peso showed any clear direction,
\nstrengthening in response to expectations that the central bank
\nmay allow short-term interest rates to creep higher next week.<\/p>\n
The lingering scandal centered on Bank Bali, threats of
\nrenewed civil conflict in East Timor and the deteriorating
\nsecurity situation in the Sumatran province of Aceh were all
\nblamed by traders for a steep midday sell-off in the rupiah.<\/p>\n
Heavy U.S. dollar sales by Indonesian and foreign banks
\ninitially pushed the U.S. currency down to touch an intraday low
\nof Rp 7,350 midmorning in Asia.<\/p>\n
At that level, however, a major buy order executed by a UK
\nbank sparked a flurry of short-covering, which pushed the dollar
\nas high as Rp 7,750 by the middle of the afternoon.<\/p>\n
"The rupiah is very, very volatile at the moment," observed
\nthe head of trading at one European bank in Jakarta, who said
\nthat poor liquidity - around US$100 million was traded on
\nThursday - was exaggerating the currency's price swings.<\/p>\n
Everyone went short (dollars) earlier in the week, and then
\nsuddenly there was this major short squeeze," said the head of
\nregional currency trading at one U.S. bank in Singapore.<\/p>\n
Market players who had earlier sold the dollar expecting Bank
\nIndonesia to support the rupiah suffered a crisis of confidence
\non Thursday, explained dealers. As sizable buy orders pushed the
\ndollar higher, the shorts rushed to cover their positions,
\npushing the U.S. currency higher still.<\/p>\n
Only solid offers from Indonesian state banks at Rp 7,770,
\nassumed by traders to have been placed by Bank Indonesia, checked
\nthe dollar's rise Thursday.<\/p>\n
According to Hubert Neiss, International Monetary Fund Asia-
\nPacific director, the rupiah should strengthen again, once the
\nmonth-old Bank Bali scandal blows over.<\/p>\n
"If the (Bank Bali case) calms down, the rupiah will
\nappreciate," he said, adding that the Indonesian government is
\n"determined to resolve the Bank Bali case speedily and
\nsatisfactorily."<\/p>\n
"But you still have to be bearish on the rupiah. All the
\ndomestic news is bad," said one Jakarta-based trader, pointing to
\ncontinued political uncertainty in Jakarta and the unrest in the
\nprovinces.<\/p>\n
By late in Asian trading the U.S. currency had settled from
\nits earlier high to be quoted at Rp 7,645, up from Rp 7,590 the
\nprevious day.<\/p>\n
Elsewhere in the region, the Philippine peso strengthened
\nslightly in response to expectations that the government may
\nallow short-term interest rates to rise rather than allow the
\nU.S. dollar to breach the psychologically significant 40.00 mark.<\/p>\n
In response, the U.S. dollar was sold down to end domestic
\ntrading at 39.740 pesos, down from 39.780 pesos at Wednesday's
\nclose.<\/p>\n
Both the Singapore dollar and the Thai baht traded sideways.
\nLate in Asian dealing, the U.S. dollar was quoted at S$1.6912,
\ncompared with S$1.6925 the day before. Against the baht, the
\ndollar was at 38.3100 baht, down from 38.3450 baht.<\/p>\n
In North Asia the Korean won strengthened slightly, despite
\ncomments early Thursday from the Finance and Economy Ministry,
\nwhich said further local currency appreciation wouldn't be
\ndesirable.<\/p>\n
At the Seoul close the dollar was at 1,190.50 won, down from
\n1,193.40 won the previous day.<\/p>\n
Against the Taiwanese currency, the U.S. dollar ended little
\nchanged at NT$31.864, compared with NT$31.867 on Wednesday.<\/p>",
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