Asian currencies depressed, intervention supports rupiah
Asian currencies depressed, intervention supports rupiah
SINGAPORE (Reuters): Depressed Asian currency markets largely ignored Indonesia's revised, IMF-endorsed 1998/99 budget, driving the rupiah to seek refuge in the arms of the central bank.
Dealers said the budget, which included a forecast of zero economic growth, inflation at 20 percent and a rupiah rate of 5,000 to the U.S. dollar, contained no surprises and left the market anxious about the unresolved issue of corporate debt.
"The market is not focusing so much on the budget revisions. It's just a theoretical exercise. What they want to see is how the government is going to cope with the debt restructuring," said the head of regional currencies trading at a European bank in Singapore.
Dealers said intervention by Bank Indonesia in a very thin market, characterized by spreads as wide as 1,000 rupiah, was practically the only thing keeping the rupiah out of the depths.
The Indonesian central bank was believed to have sold dollars for rupiah at the 14,000 level and its repeated rate checking in Singapore and Jakarta kept traders on their toes.
"The demand for dollars from Jakarta is still very strong." Banque Paribas said emergency Indonesian action to deal with the country's private sector debt crisis might be on the cards.
"What this implies for the currency market is that liquidity will likely dry up as the currency overshoots to unbelievable levels, and wide spreads could see offers reach 20,000," it said in a daily commentary.
Indonesia's troubles continued to weigh on other Asian markets, but the effect was more muted as activity wound down ahead of next week's holidays for the Lunar New Year and Islam's Eid al-Fitr.
Dealers began to view the rupiah more as an isolated disaster. The Philippine peso, an island of relative calm in recent sessions, succumbed to mounting pressure from the region and fell far enough to trigger a market rule that effectively suspends trading for the day.
Manila traders said no central bank presence was detected and even foreign banks, which were actively selling dollars recently, had stopped doing so.
The Malaysian ringgit was weak at 4.5100 to the U.S. dollar, against 4.5325 late Thursday, but activity was confined to a subdued range with dollar bids around 4.45/50.
The Singapore dollar slipped to 1.7635 to the U.S. dollar, against Thursday's 1.7500, but dealers said it looked well supported around 1.7700 for the time being.
"There's ringgit/Sing selling from the 0.3900 level and also flight-to-quality buying (of the Singapore dollar) from Indonesia," a dealer said.
The Thai baht dipped to 54.65 to the dollar onshore from 54.45 on Thursday as the market awaited details of talks between Thai Finance Minister Tarrin Nimmanahaeminda and the IMF on a review of Bangkok's bailout package.
In north Asia, the Seoul won outshone its regional counterparts, firming to 1,745 per dollar versus Thursday's 1,760 close on strong cash demand ahead of the Lunar new year festivities.
But dealers said its rise would be blocked by dollar demand from importers and banks with month-end debt servicing needs.
The Taiwan dollar sagged below the T$34.00 level from Thursday's 33.706 close as worries about the region triggered dollar demand from importers ahead of the new year break.
The Hong Kong dollar slipped to HK$7.7430 from a previous 7.7385 close as local interest rates eased.
The Australian dollar held above a support level of US$0.6560 but failed to make much headway due to fears about the rupiah.
The Indian rupee firmed to 38.65 per dollar as the impact of the central bank's measures to tighten liquidity overshadowed the potential contagion effect of other Asian currencies.
The following table shows the drop in value of Asian currencies since the crisis began in July. Currency movements are in percentage terms and reflect the local unit's fall against the dollar, not the dollar's rise.
Currency Current value Move since July 1
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Indonesian rupiah 13,000.00 -81.29%
Thai baht 54.75 -52.69%
Korean won 1,744.00 -49.08%
Malaysian ringgit 4.52 -44.25%
Philippine peso 43.80 -39.50%
Singapore dollar 1.76 -18.80%
Taiwan dollar 33.93 -18.20%
Indian rupee 38.64 -7.31%
Hong Kong dollar 7.74 0.01%