SE Asian currencies likely to remain bearish this week<\/p>\n
SINGAPORE (AFP): Southeast Asian currencies could face a new
\nround of attacks this week following the scare over the Hong Kong
\ndollar and a Thai cabinet shakeup which is unlikely to impress
\nthe market, analysts said.<\/p>\n
Uncertainty over Indonesia's talks with the International
\nMonetary Fund and Singapore's declaration that market forces
\nwould set the value of its dollar could also affect sentiment
\nwhen trading resumes Monday.<\/p>\n
"We're waiting for more volatility ahead especially with the
\nNorth Asian currencies now under pressure," said a regional
\neconomist with a financial research house in Singapore. "It's
\nprobably just the beginning."<\/p>\n
The Taiwan dollar and the South Korean won succumbed to
\npressure while the Hong Kong dollar was defended at a massive
\ncost last week as speculators who have hammered Southeast Asian
\ncurrencies since July trained their guns northward.<\/p>\n
The attacks eased Friday, but dealers and economists believe
\nit was just a pause before the market again tests the Hong Kong
\ndollar, the last major Asian currency still pegged to the U.S.
\ndollar.<\/p>\n
The territory's crisis had a knock-on effect on Southeast
\nAsian currencies, which recovered some ground but are still
\nhovering within striking distance of recent record-setting lows.<\/p>\n
"I think the tendency is for people to be long on the U.S.
\ndollar again. Nobody is really convinced that it's over," said
\nDaniel Lian, head of Asian markets research for the Australia and
\nNew Zealand Banking Group Ltd. (ANZ).<\/p>\n
Thailand underwent a cabinet reshuffle over the weekend as
\nembattled Prime Minister Chavalit Yongchaiyudh, ignoring public
\npressure to resign, put together a new team after intense
\nbargaining in the fractious coalition.<\/p>\n
Kosit Panpiemras, executive director of Bangkok Bank, the
\ncountry's largest bank, was named finance minister, replacing
\nThanong Bidaya, who quit after the premier rescinded a cabinet
\ndecision to raise oil taxes.<\/p>\n
Som Jatusipitak, president of the smaller Siam City Bank, was
\nnamed commerce minister.<\/p>\n
"The whole cabinet lineup is like old wine in a new bottle,
\nand it doesn't seem that they can inject a lot of new ideas to
\ntackle the political and economic crisis," ANZ's Lian said.<\/p>\n
Another Singapore-based regional economist described
\nThailand's new economic team as "second-tier choices."<\/p>\n
"I expect spurts of weakness to emerge on the regional
\ncurrencies because we may see more speculation in Hong Kong
\nitself or the other places like Thailand if there's more bad
\nnews," the economist added.<\/p>\n
The Singapore dollar closed Asian trading Friday at 1.5810 to
\nthe greenback, the Thai baht at 38.85, the Malaysian ringgit at
\n3.3820, the Indonesian rupiah at 3,590, and the Philippine peso
\nat 35.10 to the dollar.<\/p>\n
The ringgit and baht touched record lows last week. The
\nSingapore dollar, so far the least scarred by the currency
\ncrisis, fell to its lowest level since early 1994 when it briefly
\nslumped at 1.5974 to the dollar before interest rates surged and
\nstopped its descent.<\/p>\n
Senior Minister Lee Kuan Yew, addressing top U.S. businessmen
\nat a forum in Boston last week, confirmed market belief that
\nSingapore was deliberately allowing its currency to slide despite
\nhaving massive reserves to defend it.<\/p>\n
Economists say such "competitive devaluation" is necessary
\nbecause Singapore may lose out to neighbors like Malaysia if the
\nringgit depreciates much faster, making its electronics and other
\nexports cheaper to the U.S. and other key markets.<\/p>\n
Singapore Finance Minister Richard Hu said market forces would
\nset the Singapore dollar's value, and the Monetary Authority of
\nSingapore would only step in to prevent "violent fluctuations."<\/p>\n
"In the weeks ahead, the greenback has more upside potential,"
\nsaid Tan Kee Wee, a curency specialist with the United Overseas
\nBank of Singapore.<\/p>",
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"sponsor": "Okusi Associates",
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