Asia currencies tread water as rupiah teeters
Asia currencies tread water as rupiah teeters
SINGAPORE (Reuters): Asian currencies made a shaky start to the week amid growing tension between Indonesia and the International Monetary Fund and confusing policy signals out of Jakarta.
Indonesia's troubles depressed currency and stock markets across Asia as traders fretted about the possible repercussions of the IMF pulling out of Indonesia in the face of the government's persistent failure to meet prescribed economic reforms.
President Soeharto on Sunday questioned the suitability of the reforms, tied to Indonesia's $43 billion IMF-led bail-out package, throwing up differences between the fund and the crisis- ridden country.
The IMF said on Friday its board would not discuss Indonesia's reform program before April, effectively delaying the fund's next disbursement of $3 billion, which was due this month.
The IMF's country representative in Jakarta, Kadhim Al-Eyd, said yesterday the fund was continuing its reform review talks with the government and hoped they would be concluded soon after a new cabinet is in place following Soeharto's re-election on Tuesday.
The rupiah pulled back from its early lows of around 12,500 to the dollar, but dealers said trade was very thin and spreads wide because most traders opted to stay away from the currency.
Continuing talk Jakarta might soon resort to a fixed-rate system to stabilize its rupiah plagued the market, causing trading at most regional currency desks to wind down in the afternoon.
"People have lost a bit of money on Friday and today as well. So they just want to stay aside," a U.S. bank dealer in Singapore said.
Bambang Trihatmodjo, one of Soeharto's sons, said on Sunday Indonesia planned to go ahead with IMF reforms, but added that the government would announce a fixed rate for the rupiah soon after the swearing-in of his father for a seventh five-year term on Wednesday.
Elsewhere in Southeast Asia, the Malaysian ringgit remained weak but off its lows after diving through four to the dollar in early trade.
Dealers said the ringgit should find support from dollar sales near the 4.10 level for the time being, but they added that the dollar looked well bid at 4.00.
The ringgit has been troubled by fears about the health of Malaysia's financial sector since the central bank announced last week that four institutions needed fresh injections of capital to restore them.
The Thai baht held up relatively well as the market looked favorably at Thailand's efforts to abide by IMF reforms.
Criticism of the central bank for its handling of the financial crisis was having little impact on the baht because it came as no surprise to the market, dealers said.
Thai Finance Minister Tarrin Nimmanahaeminda said investors and credit rating agencies could differentiate between the problems faced by Thailand and Indonesia.
"I believe credit rating agencies can differentiate markets even though regional currencies have retreated sharply," he told reporters amid concerns the baht could be hurt by contagion from the rupiah.
Weaker regional currencies also hurt the Philippine peso but traders said its fall would be limited to 40.50 per dollar because of a lack of corporate dollar demand as many companies have already met their requirements in January and February.
In north Asia, the Taiwan dollar was depressed by the region and news of a rare trade deficit for February, which was seen as increasing depreciation pressures on the domestic currency.
The South Korean won strengthened as foreign investors turned net buyers of Seoul stocks after Friday's sell-off.
The Hong Kong dollar was steady while forwards shed early gains on position squaring as the rupiah paused in its slide.