Stronger rupiah boosts other Asian currencies<\/p>\n
SINGAPORE (Reuters): Most Asian currencies posted robust gains
\non Tuesday as mounting speculation that Indonesia was on the
\nverge of adopting a currency board system spurred hasty dollar
\nsales.<\/p>\n
Dealers were skeptical of the viability of such a system --
\nunder which the rupiah would be pegged at a fixed rate to the
\ndollar and backed by dollars equivalent to the amount of money in
\ncirculation -- but they said foreign funds were bailing out of
\nthe dollar pre-emptively.<\/p>\n
"It seems the government wants to force in the fixed system
\nalthough the market seemed to view the system as not applicable
\nfor Indonesia in its traditional form," a U.S. bank dealer said.
\n"People are selling dollars for now while digesting the
\nimplications," she said.<\/p>\n
Indonesian officials said the government was still studying
\nthe proposal and no decision had been taken.<\/p>\n
The rupiah surged towards the 7,000 per dollar level in
\nafternoon trade, a rise of more than 30 percent from late Monday
\nlevels as players worked themselves up over the proposal.<\/p>\n
"Now the market's expecting them to announce a currency board.
\nIf they don't it's (the dollar) going to go all the way back up
\nagain," said a U.S. bank dealer in Singapore.<\/p>\n
"If they do, initially I think the market will just wait and
\nsee what the regulations are. Is the market open to both onshore
\nand offshore or is it like the two-tier system that Thailand just
\ncame out of?" she said.<\/p>\n
The Malaysian ringgit rose more than nine percent, bursting
\nthrough barriers at 3.80 and 3.60 to the dollar as the rupiah's
\nrebound triggered stop-loss dollar sales in a thin market.<\/p>\n
"Dollar\/ringgit looks like it could go to 3.40. But buying of
\nthe ringgit\/Singapore dollar will help dollar\/Sing stabilize
\naround 1.61-1.63," a dealer said.<\/p>\n
The ringgit hit a two-and-a-half month high of 46.13 Singapore
\ncents on Tuesday.<\/p>\n
Finance Minister Anwar Ibrahim said Malaysia's current account
\ndeficit should be reasonably close to three percent in 1997 and
\nthe ringgit had strengthened, but it was still at an
\nunsatisfactory level.<\/p>\n
Anwar, on a visit to Tokyo, also said he discussed using the
\nyen as a trade settlement currency and Japan's Finance Ministry
\nwas "quite positive" on the idea.<\/p>\n
The Singapore dollar shot through 1.63 to the U.S. dollar,
\nlevels not seen since mid-December, propelling the local stock
\nmarket almost four percent higher in late trade.<\/p>\n
Dealers said the Monetary Authority of Singapore, the de facto
\ncentral bank, might have bought U.S. dollars at the 1.6350 level
\nto curb the Singapore dollar's sharp rise, but there was no sign
\nof aggressive intervention.<\/p>\n
They said the Singapore dollar was likely to target a key
\npsychological barrier at 1.60 to the U.S. dollar soon.<\/p>\n
The Thai baht shrugged off early lethargy and strengthened
\nwithin a whisker of the 45.00 per dollar barrier as dollar
\nselling against Southeast Asian currencies gathered pace.<\/p>\n
The Philippine peso finished firmer as foreign funds sold
\ndollars against an improved backdrop in regional markets.<\/p>\n
Manila traders said funds were buying pesos and investing them
\nin interest-bearing instruments and equities.<\/p>\n
In north Asia, the Taiwan dollar finished stronger as
\ninvestors took advantage of the U.S. dollar's weakness in Asia.
\nDealers said more gains were in store unless tensions between the
\nUnited States and Iraq escalated.<\/p>\n
The Hong Kong dollar held steady while forwards backed off in
\nthe face of the rupiah's rise.<\/p>\n
Dealers said Hong Kong interest rates would reverse course and
\nstrengthen if political conditions worsened in Indonesia in the
\nrun-up to the March presidential election.<\/p>\n
Only the South Korean won bucked the regional trend, ending
\nweaker on speculative dollar buying sparked by fears of labor
\nunrest after a militant union group rejected last week's
\nagreement making layoffs easier.<\/p>",
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