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.