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.