All eyes turn to Thai bailout

All eyes turn to Thai bailout

SINGAPORE (AFP): Southeast Asian currency markets are
anxiously awaiting the International Monetary Fund (IMF) bailout
plan for Thailand as the region's monetary crisis enters its
second month with no clear end in sight.

Since the Thai baht was effectively devalued July 2, the
Philippine peso, the Malaysian ringgit, the Indonesian rupiah and
the Singapore dollar have all plunged to levels unseen in years
as speculators capitalized on real and perceived weaknesses in
the region.

Economists said a positive Thai government reaction to the IMF
rescue package, expected to be unveiled early this week and
likely to prescribe bitter financial medicine, would provide some
relief for regional currencies.

"We expect the IMF to suggest some form of belt-tightening in
terms of government spending and also a more conservative
approach with regard to the financial sector," said Andy Tan,
general manager of investment house MMS International in
Singapore.

"If the government is reluctant or unwilling, that could spark
fresh weakness," he warned. "If the baht continues to be under
attack, then the rest of the Southeast Asian currencies could be
affected as well."

"The baht is the catalyst for the region at the moment," said
Desmond Supple, head of Asian currency research at BZW (Barclays)
Global Foreign Exchange in Singapore. "The baht is providing
trading direction."

He said any salutary effects from the IMF package on currency
stability could be short-lived because baht weakenesses would
resurface, triggering another across-the-board attack on regional
currencies.

Supple said IMF austerity measures could lead to a slowdown in
growth and rising credit risks, "and that's an environment that
is not conducive to renewed capital inflows." Moreover, some 40
billion dollars in short-term Thai debt is maturing in the next
12 months, he said.

"It all suggests that the baht has a lot further to fall
before it can begin to stabilize," Supple said.

The baht, which closed here Friday at 31.90 to the dollar, has
shed 29 percent of its value offshore since a managed float was
announced by the central Bank of Thailand on July 2.

The Philippines was forced to do the same for the peso on July
11. On Friday it traded at around 29.00 to the dollar, nearly 10
percent down from pre-depreciation levels.