Asia currencies stuck on Indonesia, baht shines

Asia currencies stuck on Indonesia, baht shines

SINGAPORE (Reuters): Asian currencies were mostly steady
yesterday as activity wound down ahead of an event-filled weekend
in Indonesia.

Dealers said trade was subdued as the market awaited the
formation of Indonesia's new cabinet on Saturday morning, while
pressure mounted on Jakarta to stick to International Monetary
Fund reforms.

A senior IMF team, U.S. Treasury Undersecretary of
International Affairs David Lipton, Japanese Prime Minister
Ryutaro Hashimoto and senior Finance Ministry official Eisuke
Sakakibara are all expected in Jakarta by the weekend.

IMF Managing Director Michel Camdessus said in Washington he
hoped the fund could soon release the second $3 billion tranche
of its loan package to Indonesia.

The IMF announced last week it was delaying the disbursement
until the economic and political situation in Indonesia became
clearer.

Camdessus also said the IMF was still opposed to the idea of
Indonesia implementing a currency board at present, given its low
level of reserves, the vulnerability of the banking system and
large corporate debt.

He said Indonesia had to reform its economy and banking system
before attempting to introduce a currency board.

The Indonesian rupiah was stagnant as traders kept away on
continuing speculation that Jakarta might announce a currency
board or some other system to stabilize the rupiah after the new
cabinet appointments.

"People just find dollar/rupiah too risky at the moment. And
there are also a lot of dollar bids out of Hong Kong at the
10,400/500 levels," a U.S. bank dealer in Singapore said.

She added that funds were reducing their long dollar positions
against the Malaysian ringgit and Singapore dollar due to
uncertainty about the possible introduction of a currency board.

"When we get to the weekend, there's always talk of a currency
board being introduced so there's been some squaring out of long
dollar positions against the ringgit and Sing dollar," she said.

"But if there's no currency board on Monday, everyone will buy
dollars again," she added.

Some dealers said much of the uncertainty hanging over
Indonesia, and depressing Asian markets, was likely to be cleared
up after the weekend and the U.S. dollar could therefore come
under intense pressure next week.

Elsewhere, the Thai baht gained more than four percent
following stop-loss dollar sales at the 43.00 level, which had
posed a stubborn barrier in recent sessions.

Dealers said sentiment towards Thailand had continued to
improve and the market was beginning to hope for a credit ratings
upgrade.

Prime Minister Chuan Leekpai, on a visit to the United States,
said the Thai economy had turned the corner, and the reforms
which Bangkok introduced should see it through the financial
crisis.

"There are positive developments out of the U.S. so funds are
turning back to long baht positions and going short the ringgit
and Sing," a senior regional currencies dealer in Singapore said.

He said the baht was becoming the favored currency in Asia,
and there were even signs players were going long baht/yen due to
Japan's widening bribery scandal.

In north Asia, the South Korean won rose on stop-loss dollar
sales as the central bank continued to sell dollars to settle its
forward transactions and there was limited demand from importers.

Seoul traders said it bounced back from a day low of 1,554 to
the dollar, reached on news North Korea had announced a state of
"wartime mobilization".

But Seoul's defense ministry said North Korea seemed to be in
an annual military exercise.

The Finance Ministry said international creditors had agreed
to roll over $21.37 billion of South Korea's short-term debts.

It also said usable foreign reserves rose to $20.22 billion as
of March 12, from $8.87 billion at the end of 1997, due to
inflows from the IMF's bailout package and growing debt
rollovers.

The Taiwan dollar gave way to importer demand for dollars in
late trade.