Rupiah extends gains on currency peg news<\/p>\n
JAKARTA (JP): The rupiah extended gains against the U.S.
\ndollar for a second consecutive day yesterday on the confirmation
\nthat the government will fix the rupiah exchange rate under a
\ncurrency board arrangement, currency dealers said.<\/p>\n
Currency dealers said the rupiah closed firmer at 7,200\/7,300
\nagainst the U.S. dollar yesterday, up 62 percent from its lowest
\nlevel of 16,800 early last month.<\/p>\n
Dealers said the currency market shrugged off reports of
\ndemonstrations in the capital city demanding the government lower
\nprices for basic essentials.<\/p>\n
"I think offshore operators have probably started to take
\nprofits on their long rupiah positions now. They are afraid that
\nthe rupiah might soon firm up to close near the 6,000 level
\nsoon," a chief dealer with a local private bank said.<\/p>\n
"Several Singapore operators were seen selling large amounts
\nof dollars for rupiah yesterday," the dealer said.<\/p>\n
Currency dealers said the rupiah was traded in a range between
\nits highest level of 7,200 and its lowest level of 7,600 before
\nending at 7,200\/7,300 yesterday.<\/p>\n
"I sense a market fear that the rupiah might soon be pegged at
\n6,000 against the American dollar," the dealer said.<\/p>\n
But currency dealers said that although there were large
\namounts of dollars being sold by offshore operators, it did not
\nmean that market confidence had recovered.<\/p>\n
"I'm afraid some overseas operators, such as those from
\nSingapore, might enter the market to drag down the rupiah again
\nlater at a fixed rate," the dealer said.<\/p>\n
The dealer, therefore, suggested that the government restrict
\nthe amount of dollar buying in the coming days and record the
\npurpose of dollar buying to prevent the rupiah from being dragged
\ndown by offshore players.<\/p>\n
"Without such controls, the rupiah might decline again
\non massive dollar buying by overseas operators," the dealer said.<\/p>\n
Dealers said currency market players shrugged off news of a
\nprotest staged by hundreds of people in South Jakarta yesterday
\ndemanding the government lower the prices of basic essentials.<\/p>\n
Asian currencies<\/p>\n
Other Asian currencies shaved early gains yesterday as traders
\ncautiously booked profits on recent sharp rises driven by
\nIndonesia's move towards a currency board system to stabilize its
\nrupiah, Reuters reported.<\/p>\n
In Singapore, the rupiah remained stuck below the 7,000 per
\ndollar level yesterday and dealers said it was unlikely to
\nstrengthen much beyond 6,500 amid persistent skepticism about the
\nsuitability of the fixed exchange rate plan for Indonesia.<\/p>\n
Elsewhere, the Malaysian ringgit slithered back through the
\n3.50 level against the dollar after surging towards 3.40 on stop-
\nloss dollar sales in thin, early trade.<\/p>\n
Dealers said the dollar looked well bid by Kuala Lumpur
\ncompanies and U.S. funds and investment houses below the 3.40
\nringgit level but was likely to face a barrier at 3.60 for now.<\/p>\n
The Singapore dollar reached a high of 1.61 to the U.S. dollar
\nbefore slipping back through 1.63 in late trade.<\/p>\n
Dealers said U.S. dollar buying by local banks near the
\ndomestic dollar's highs had sparked speculation of intervention
\nby the de facto central bank.<\/p>\n
"But I think their operation would have been minimal, just to
\nstabilize the market," one currency analyst said.<\/p>\n
The Thai baht came off its highs near the 41.00 per dollar
\nlevel, but remained above 45.00 to the dollar in thin offshore
\ntrade with Thai markets closed for a holiday.<\/p>\n
Dealers said the baht also gained from reports that Japanese
\nfinancial institutions had agreed to roll over the bulk of their
\nloans to Thailand's private sector.<\/p>\n
A Thai newspaper said the Bank of Thailand had discussed with
\nthe International Monetary Fund the possibility of a currency
\nboard system to control baht volatility.<\/p>\n
The Philippine peso slid back after rising through its first
\nvolatility band at 37.568 to the dollar on early inflows of
\nportfolio funds.<\/p>\n
In north Asia, the Taiwan dollar finished higher on the yen's
\nstrength and rises in other Asian currencies.<\/p>\n
The Hong Kong dollar held up while forwards fell to three-
\nmonth lows amid continuing strength in regional markets.<\/p>",
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