Asian currencies drop on Korean aid worries

Asian currencies drop on Korean aid worries

SINGAPORE (Reuters): Asian currencies were driven to new depths yesterday, a sign of growing impatience in the region for a definitive announcement of a financial bailout package for South Korea.

Most markets were off their lows near the end of the day but currencies from Wellington to Bombay were bruised as operators fled to safer territory in the U.S. dollar.

"The whole region has suffered in sympathy with the Korean won," said David Cohen, Singapore-based senior economist with Standard & Poors/MMS.

He said jitters over the outcome in South Korea affected virtually all regional currencies, with others suffering from delays to reform of their own financial institutions, as in Thailand.

Traders said overall sentiment was undermined by the "on again, off again" nature of negotiations between Seoul and the International Monetary Fund on a huge aid package.

The head of foreign exchange at a bank in Singapore said the market was confused by contradictory statements from Korean officials since Monday on whether a deal had been clinched.

"These statements are then denied by one person or another. It's pretty confusing," he said. "It's quite clear there's still some horse-trading going on, but we're in the dark, so there's really only one thing to do and that's sell."

At the end of the day, South Korean Finance Minister Lim Chang-yuel told reporters an agreement specifying the terms of a bailout would be signed on Wednesday when IMF managing director Michel Camdessus was due in Seoul.

The Korean won hit a record low of 1,290 to the dollar during the morning before recovering a little to 1,228 at 0730 GMT. It closed at 1,235 on Monday.

The baht fell further below the 41.50 level late on Tuesday as companies and importers, fearing further tumbles, bought dollars to meet year-end needs, dealers said.

The baht fell to 41.65/41.75 per dollar at 1015 GMT in the onshore market compared with 40.95/41.10 in the morning. Offshore, it was quoted at 41.30/41.50 to the dollar against 41.13/41.28 early.

The Malaysian ringgit suffered another torrid day. It plunged to hit a record low of 3.6200 to the U.S. dollar at one stage before recovering to trade around 3.5950 at 1015 GMT.

It was quoted in late Asian trade on Monday at 3.5550/5650. Traders said continued calls by Prime Minister Mahathir Mohamad to regulate -- and tax -- foreign exchange trading were not helping sentiment.

Even the Hong Kong dollar -- which has seen two major speculative attacks against it recently -- was lower. At 1015 GMT, it was quoted at 7.7355/85 compared with Monday's finish of 7.7310/20.

The Singapore dollar was not immune either, hitting a 46-month low against the dollar of 1.6120 during the afternoon.

It recovered to 1.6085/100 against late Monday's 1.6030.

The Taiwan dollar was also dragged lower by the won. It was trading at 32.200/243 to the dollar at 1020 GMT compared with Monday's finish of 32.110.

Further west, the Indian rupee was embroiled in its own problems. The currency has been falling steadily since the collapse of the Indian government on Friday, when it ended at 38.55/59.

At 1020 GMT, the rupee was at 39.250/300.

In late trade the Australian dollar was quoted at $0.6786/06 compared with Monday's close of 0.6782/87, with dealers concerned that Australian export competitiveness could be affected by the turmoil.

The New Zealand dollar fell in sympathy and was trading around three year lows of $0.6080/85 at 1020 GMT. It closed at $0.6109/16 on Monday.