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.