Asian currencies down on yen slide and Indonesian politics

Asian currencies down on yen slide and Indonesian politics

SINGAPORE (Dow Jones): A surge in the U.S. dollar to a four- and-a-half month high against the yen pushed Asian currencies lower late Wednesday.

The U.S. currency rose above Y109.00 for the first time since mid-September on concerns that Japan's burgeoning fiscal deficits haven't stimulated domestic demand sufficiently to ensure a self- sustaining recovery. An expected interest rate rise in the U.S. later Wednesday also helped the dollar.

Fitch IBCA, an international ratings agency, says there would have to be concern about Japan's credit outlook if large budget deficits persist. Fitch downgraded Japan's long-term foreign currency rating in September 1998.

Concerns over the political climate in Indonesia are also weighing on regional currencies, particularly the Indonesian rupiah and Singapore dollar, as a showdown looms between Indonesian President Abdurrahman Wahid and Coordinating Minister for Political Affairs and Security General Wiranto.

Wahid, who is in Europe for meetings with political and business leaders, Tuesday again called for Wiranto to quit his Cabinet post after a government report blamed him and other top officers for atrocities in East Timor last year.

Wiranto, who attended a Cabinet meeting Wednesday in Jakarta, continues to ignore calls for his resignation, which some observers interpret as a signal he will defy Wahid. This would add to tension between the administration and disgruntled elements of the military, and has sparked talk of a possible military coup, although Wahid dismissed such speculation as "hogwash."

However, the rupiah's failure to rally on confirmation the Consultative Group for Indonesia will help fund Jakarta's fiscal year 2000-01 budget deficit with up to US$4.7 billion in new loans shows the level of concern in financial markets. The CGI comprises Indonesia's main international donors.

In late Asian trade, the dollar was quoted at Rp 7,520, up slightly from Rp 7,450 late Tuesday, while Jakarta stocks again lost ground, defying another strong night on Wall Street. The Jakarta Composite late in the day was down 2.1 percent at 603.69, extending its losses since Monday's close to more than 5 percent.

The Singapore dollar was weaker against its U.S. counterpart in line with the decline in the rupiah.

But most traders and analysts believe the Singapore currency is a value buy against the U.S. dollar above S$1.7000 as the Monetary Authority of Singapore in the second half of 2000 may look to tighten monetary policy through a stronger exchange rate. Many are forecasting a move under S$1.6000 by the year end.

The U.S. currency was quoted against the Singapore dollar at S$1.6985 late in the day, up from S$1.6955 at Tuesday's close.

The South Korean won suffered heavy losses Wednesday in line with the weaker yen.

Buying of dollars by the state-run Korea Development Bank pushed the won to a brief intraday low of 1,134 won. Late in the day the dollar was at 1,130.5 won, up from 1,126.6 won at Tuesday's close.

Authorities in recent sessions have used yen weakness to help push the won lower, and thereby keep South Korean export prices competitive with those of Japan.

Elsewhere, the U.S. currency was at 37.560 Thai baht, up from 37.505 baht previously. In Taipei, the dollar was higher against the New Taiwan dollar, quoted at NT$30.767 from NT$30.699 a day earlier. The Philippine peso late Wednesday was at 40.640 pesos against the U.S. dollar from 40.572 pesos at Tuesday's close.