Asian currencies down late, rupiah plunges to 30-month low
Asian currencies down late, rupiah plunges to 30-month low
SINGAPORE (Dow Jones): The Indonesian currency Monday suffered
one of its hardest blows since the Asian financial crisis,
plunging below the Rp 11,000 rupiah level in intraday dealings,
though its spillover effect on other Asian currencies appeared
muted, dealers said.
Rather, it was a confluence of factors such as the floundering
Japanese yen and steep losses on Asian bourses - fueled by a 5.3
percent fall on Nasdaq Friday - that dragged Asian currencies
lower.
The impact of the yen and Nasdaq was greatest in Northeast
Asia, dealers said.
While the Indonesian currency's plunge rattled other Asian
currencies - especially the Singapore dollar - market watchers
said the rupiah was only a contributing factor to the region's
malaise.
Analysts noted that trading interest in the rupiah has
dwindled sharply since the crisis, especially after the
Indonesian central bank in January tightened its foreign exchange
rules, effectively wiping out offshore trading in the rupiah spot
market. This would mitigate the risk of a contagion on other
Southeast Asian currencies, while the tighter liquidity would
lead to increased volatility in the rupiah.
"I'm not sure if the spillover effect would be as direct as it
would be three or four years ago," said David Simmonds, a
regional currency strategist at Salomon Smith Barney/Citibank.
"The rupiah market is much smaller these days."
"The greater implications are in terms of Indonesia's overall
policy and political stability, and the sort of regional
ramifications, rather than necessarily through direct linkages,"
Simmonds added.
The rupiah's collapse below the Rp 10,000 psychological
barrier Friday triggered panic dollar-buying by corporates,
retail investors and banks Monday, dealers said.
Also casting a shadow on the rupiah were demonstrations by
thousands of students outside the state palace Monday, demanding
that President Abdurrahman Wahid quit.
The rupiah had plummeted by about 14 percent to as low as Rp
11,500 earlier Monday, its weakest level since September 1998.
Late Monday, the dollar was quoted at Rp 10,675, up from
around Rp 10,140 late Friday in Asia.
Despite Bank Indonesia's ability to staunch the rupiah's
decline beyond the psychologically important Rp 11,500 level
Monday, market watchers were doubtful of the central bank's
ability to sustain a defense of the currency, given its lack of
ammunition.
Indeed, market participants launched a more aggressive assault
on the rupiah after Bank Indonesia's Deputy Governor Anwar
Nasution admitted Monday to the central bank's limited ability to
support the ailing rupiah.
The rupiah's freefall conspired with the Japanese yen's slide
to a 20-month low to deal a blow on other Southeast Asian
currencies, dealers said.
The Singapore dollar was the hardest hit, falling below the
S$1.7600 psychological support against the U.S. currency. Fears
of intervention by the Monetary Authority of Singapore, however,
limited the local dollar's intraday fall to around S$1.7620,
dealers said.
Around 0850 GMT, the U.S. dollar was at S$1.7610, up from
S$1.7575 late Friday.
In the Thai currency market, the dollar was at 43.735 baht, up
from 43.515 baht late Friday.
The peso closed at 48.145 pesos to the dollar on the
Philippine Dealing System, up from 48.065 pesos Friday.
The yen's decline and Nasdaq-induced losses on the North Asian
bourses dented the South Korean won and the New Taiwan dollar,
dealers said.
Against the New Taiwan dollar, the U.S. currency closed at
NT$32.473, up from NT$32.402 in the previous session.
The dollar finished at 1,278.4 won, up from Friday's close of
1,268.8 won.
Amid worries about the health of the Japanese economy, the yen
weakened to Y120.60 against the dollar, from Y119.56 late Friday
in New York.