Asia currencies' gloom thick ahead of IMF deal

Asia currencies' gloom thick ahead of IMF deal

SINGAPORE (Reuters): Asia's wounded currencies were shoved
into unchartered territory yesterday as a much-awaited rescue
plan between Seoul and the International Monetary Fund (IMF)
appeared elusive until the end of the day.

A flood of dollar purchases fueled by fear of an impasse to
the billion dollar bail-out agreement sent some Southeast Asian
currencies to historic lows.

But an 11th hour announcement eleventh hour by South Korea's
Finance Ministry that a deal with the IMF was imminent -- a
letter of intent was signed shortly afterwards -- helped stall
the erosion of the Thai baht and Indonesian rupiah.

The South Korean ministry said a news conference at 1130 GMT
would detail the terms and conditions of the loan. The IMF said
it was recommending a $21 billion standby credit for Seoul over
three years.

Currency experts said financial instability in South Korea,
and repeated delays in agreement with the IMF, were among many
factors triggering dollar accumulation.

"The market is a little long on U.S. dollars because people
have been buying the whole day. It's a function of the delay and
everything else in the region," said a dealer with a Japanese
brokerage, noting a general fear of corporate failures.

But the dealer said he expected dollar demand to ease.

"An agreement, any bit of good news, should see it come back
off," he said.

Currency traders and economists said that until a deal was
signed, the market had little choice but to sell the won and
other regionals currencies.

"There will be relief if they can reach agreement," said
Andrew Fung, regional treasury economist with Standard Chartered
Bank who thought the sticking point in the talks had probably
been the closure of banks or stricter compliance issues.

"There was talk of requiring commercial banks to adhere to
much higher adequacy ratios," he said.

South Korea's financial crisis knocked the won to a 1,290 low
against the dollar before it regained some ground to 1,195/1,199
against Tuesday's close of 1,235.

News of financial difficulty at South Korea's Halla Group also
led to won sales on fears of mass bankruptcies from the expected
tough IMF rescue conditions, dealers said.

The Thai baht fell sharply, prompting government appeals for
investors to stay calm and central bank intervention.

The intervention helped the baht onshore to recover and be
quoted at 42.58/42.68 per dollar versus 42.90/43.10 earlier.
Indonesia's rupiah slipped to a new low of 3,940 against the
dollar against late Tuesday's 3,800 level.

Dealers said they expected the currency to test the 4,000 per
dollar barrier if 3,950 was broken, but anticipated central bank
action to halt the erosion.

In Malaysia, the ringgit suffered as corporate demand for
dollars dragged it to 3.6750 before recovering to 3.6500 at 0930
GMT. It stood around 3.5950/6050 late on Tuesday.

A dealer in Singapore said there rumors that Bank Negara would
step in to buy ringgit at 3.6800.

The Singapore dollar sank early to a 52-month low against U.S.
dollar at 1.6170, down in line with regional falls.

"The Sing is basically following the pack down. Investors are
trying to get out of Asia because of no confidence," a dealer
with a U.S. brokerage said.

It recovered to 1.6120 but stayed vulnerable to falls.

The Philippine peso hovered around previous levels at 35.00,
up from Tuesday's low of 35.26. Dealers said thin liquidity in
the market for dollars slowed the peso's decline.

Taiwan's dollar drifted moderately lower to T$32.221/32.230 in
late action compared with Tuesday's T$32.200.

In Hong Kong, the dollar dipped through a key support level of
HK$7.74 but rebounded to HK$7.7385/95 per dollar, as traders took
profit against the greenback.