Asian currencies drop on Indonesian fears
Asian currencies drop on Indonesian fears
SINGAPORE (Reuters): Asian currencies weakened yesterday amid
fears the International Monetary Fund's next disbursement of aid
to crisis-riddled Indonesia might be delayed.
Senior banking sources in Jakarta said Indonesia's political
preoccupations ahead of next week's election and the need to
reassess some fundamental economic assumptions were likely to
push back an IMF review of the country's performance.
An IMF review team is in Jakarta to assess progress on reforms
and economic performance before the fund decides on the release
of a second $3.0 billion assistance tranche.
Dealers said the Indonesian rupiah fell to a low of 9,500 per
dollar as London players bought dollars from the 9,100/200
levels.
Mounting pressure on Jakarta to abide by IMF reforms and
abandon plans for a currency board had pushed the rupiah below
9,000 per dollar overnight.
Deputy U.S. Treasury Secretary Lawrence Summers said the
United States would not support payment of additional funds from
Indonesia's IMF-led rescue package unless there was progress on
budget, structural, monetary and banking sector reforms.
Indonesian financial markets were unimpressed by news of the
country's $11.77 billion trade surplus in 1997 and $1.535 billion
surplus for December.
Fears about a potential delay in IMF aid to Indonesia
undermined the fragile stability of Asian currency markets, which
had recovered some composure after sliding on news that
Malaysia's Sime Bank had posted losses and needed fresh funds to
recapitalize.
Bank Negara governor Ahmad Don said late on Tuesday that Sime
Bank was not insolvent and depositors in the bank would not be
affected as their interests were guaranteed by the government.
The ringgit fell from its highs above 3.60 to the dollar on
Tuesday while Kuala Lumpur stocks ended nearly four percent lower
on Wednesday.
But currency dealers said the ringgit had absorbed the worst
of the shock and was unlikely to revisit a low of 3.85 to the
dollar soon.
"If anything, it should correct back because they're still
afloat and the talk of the RHB merger is positive. So people
shouldn't get so nervous. The dollar was a bit overbought," a
senior regional currencies dealer in Singapore said.
Malaysian financial services firm Rashid Hussain Bhd said on
Tuesday it had received approval from Bank Negara to proceed with
merger negotiations for the acquisition of Sime Bank.
Across the border, the Singapore dollar was pulled down by the
rupiah's fall but steered clear of its early lows of 1.6450 to
the U.S. dollar.
The Thai baht slipped from its recent perch as declines in the
ringgit and rupiah added to domestic concerns about a no-
confidence motion against the government and criticism of the
central bank's heavy spending to defend the baht and bail out the
finance sector.
The Bank of Thailand said it had loans worth 716 billion baht
outstanding to ailing financial institutions.
Finance Minister Tarrin Nimmanahaeminda said the government
was seeking the expertise of the World Bank, IMF and major
central banks to help restructure the Bank of Thailand.
The market showed little immediate reaction to news that a new
Japanese loan of $600 million to Thailand, currently under
discussion, would be agreed by the middle of March.
The Philippine peso tracked movements of other Southeast Asian
currencies, recovering slightly after dropping below 40.00 per
dollar in early trade.
The South Korean won recouped early losses on unwinding of
dollar positions by banks.
Seoul traders said the won's direction would be determined by
foreign inflows to the stock market, which slowed on Wednesday.
The Taiwan dollar ended firmer on persistent foreign equity
inflows to the stock market.
The Hong Kong dollar was steady while forwards extended their
gains as the ringgit's drop shook the recent calm of regional
currency markets.