Asian currencies forecast to maintain recovery path

Asian currencies forecast to maintain recovery path

SINGAPORE (AFP): Asia's troubled currencies are expected to
maintain their recovery against the U.S. dollar this week as
Indonesia and the International Monetary Fund (IMF) appear close
to signing their third pact to put the shattered economy on its
feet.

"Range-bound trading is expected but downside is not likely to
be seen," said Jacqueline Ong, regional economist with London-
based financial house IDEA.

She said the Indonesian rupiah could move within a range of
8,000 to 8,500 against the U.S. dollar amid expectations that the
IMF would free up the second tranche of aid money to be delivered
under a global bailout package of some US$40 billion.

The tranche was delayed because of Indonesia's failure to
stick to a tough reform program demanded by the IMF, which has
been negotiating with Jakarta for the past two weeks on a third
letter of intent after two previous pacts collapsed.

Sani Hamid, emerging markets analyst with Standard and Poor's
MMS, said an agreement between the IMF and Jakarta could be
reached this week.

He said U.S. dollar-yen play could also dictate the movements
of the regional currencies amid market speculation that Japan's
central bank could intervene to stem further decline of its
currency.

Among the bruised regional units, the rupiah was the biggest
gainer against the U.S. dollar last week -- chalking up a 9.3
percent gain to end at 8, 525 on Friday on the back of a 10.9
percent rise the previous week.

The South Korean won, boosted by a flow of foreign capital
into the economy and growing foreign reserves, rose 4.7 percent
against the greenback last week to 1,377 after a five per cent
jump last week.

The Malaysian ringgit and the Thai baht also rose 2.2 percent
each against the dollar to 3.5850 and 38.55 respectively after a
successful run the previous week.

Dealers said the ringgit could trade around a range of 3.5500
to 3.5800 if there were no negative news on the closely-watched
banking sector while the 37 level remained a near term resistance
for the baht.

ANZ Investment Bank's Asian markets research arm has advised
clients to accumulate long rupiah positions at 8,500 or higher
and seek profit targets at 7,000-7,500 levels and target stop
losses at 9,500-10,000.

"Advocate staying long on IDR (rupiah), given the firmer
interest rate outlook and a probable breakthrough in corporate
debt rescheduling," it said in a bulletin to clients.

The IMF is still discussing various foreign debt rescheduling
proposals by Indonesia, whose interest rates surged last week --
resulting in attraction of capital into the domestic banking
system for the first time in six months.

ANZ Investment Bank said that if the Indonesian situation
improved, the Singapore dollar, which ended the week below 1.6000
against the U.S. dollar for the first time in four months, could
test the pivotal 1.5500.

"We expect a probable intra-day breach of 1.55 if IDR were to
strengthen to 7,000 plus," it said.

Ong of IDEA said she expected the Singapore authorities to
prevent any rapid rise of the Singapore dollar to maintain its
competitiveness in the region. It was rumored early last week
that the Monetary Authority of Singapore intervened to cap the
Singapore unit at 1.6000.