Asian currencies fall over possible IMF loan delay to RI

Asian currencies fall over possible IMF loan delay to RI

SINGAPORE (Reuters): Asian currencies succumbed yesterday to
anxieties about a delay in IMF funding to Indonesia and the
health of Malaysian and Singapore banks.

The U.S. dollar's grip above 127 yen against the backdrop of a
widening bribery scandal at Japan's Finance Ministry and Wall
Street's negative impact on Asian stock markets added to the
gloomier tone of regional currencies.

Dealers cited growing hedge fund activity as the Indonesian
rupiah fell through 10,000 to the dollar in Singapore and the
Malaysian ringgit headed back towards 4.00 to the dollar for the
first time in over two weeks.

Singapore's dollar was also badly hit by news Moody's
Investors Service had downgraded its outlook on six local banks
to negative from stable, reflecting the possibility of continued
deterioration in regional conditions.

"The market's still very bullish on the U.S. dollar. Although
there is selling interest on the way up, the dollar should go
higher eventually," a U.S. bank dealer in Singapore said.

The Indonesian rupiah fell as worries mounted over the delay
of an IMF economic review of the country's reforms and on rumors
a proposed currency board would be shelved.

An IMF team is in Jakarta reviewing the country's progress on
economic reforms and has said its report back to Washington would
probably be delayed for two to three weeks, setting back the next
disbursement of IMF funds to Indonesia.

Senior banking sources said the delay was simply due to next
week's elections and the need to reassess some economic
assumptions, but traders worried that Indonesia's failure to
abide by certain reforms was holding up the funding.

"The delay might only be technical but it is worrying, and the
market is becoming more cynical about the political motives
behind the whole currency board idea," said one Singapore-based
analyst.

Dealers said the market was utterly confused about the planned
currency board, but the longer the uncertainty dragged on, the
less of a prop it would be to the rupiah.

British Junior Foreign Minister Derek Fatchett, in Jakarta as
part of a Southeast Asia tour, said yesterday President Soeharto
had assured him Indonesia was committed to the IMF-backed
reforms.

The Malaysian ringgit slid through the 3.90 per dollar level
due to continuing fallout from Tuesday's news that Sime Bank, the
country's fifth largest bank, had suffered huge losses and needed
1.2 billion ringgit in fresh capital to restore it.

The central bank said Bank Bumiputra, Malaysia's second
largest bank, may also need a large injection of cash.

Malaysian Prime Minister Mahathir Mohamad said the government
was willing to support any government-owned financial institution
in need of help and blamed banks' woes on market speculators.

Across the border, the Singapore dollar was hurt by Moodys'
announcement, which followed poor 1997 earnings reports from
three local banks on Wednesday, including unexpected news of a
loss at one of the smaller banks.

The Thai baht extended its decline on corporate dollar demand
amid losses in the region and the opposition's no-confidence
motion against the government.

Comments by U.S. officials praising Thai reform efforts, a
pledge of a fresh IMF credit line if needed and Japan's $600
million loan to Thailand failed to lift the gloom.

The Philippine peso fell prey to its neighbors' woes and news
inflation rose to 7.4 percent year-on-year in February.

Central bank governor Gabriel Singson said the bank was
optimistic it was on target for a 7.5-8.5 percent rate of
inflation in 1998.

The Taiwan dollar finished weak as foreign institutional
investors pulled some funds out of the stock market following its
sharp drop yesterday.

But dealers expected the Taiwan dollar to stabilize as foreign
funds, which channeled more than $1 billion into the stock market
in February, were seen returning.

The South Korean won was also hurt by slowing foreign buying
of stocks and weakness elsewhere, though news a foreign investor
planned to buy $300 million worth of Korea Development Bank bonds
provided some respite.

The Hong Kong dollar was steady and forwards firmed as anxiety
hit regional currency markets.