Asian currencies hold ground as dollar rises

Asian currencies hold ground as dollar rises

SINGAPORE (Reuters): Most Asian currencies kept their footing
yesterday as the U.S. dollar burst above a stubborn barrier at
130 yen after reports Japan's government might not include income
tax cuts in a new stimulus package.

The Malaysian ringgit was the biggest gainer, reaching highs
of around 3.64 to the dollar on unwinding of baht/ringgit crosses
after the dollar bounced up from lows near 40.00 per dollar on
buying by a Hong Kong-based U.S. investment house.

Dealers said the ringgit would face resistance at the 3.63
level after breaking out of its recent 3.70-3.80 range, but the
market remained upbeat on Malaysia ahead of the government's
expected release of new economic stimulus measures next week.

"People who were short ringgit and long baht are unwinding
those positions as the dollar/baht goes up," said a European
dealer in Singapore.

Dealers said funds were adjusting their positions in the baht
as a debate on a no-confidence motion against the Thai government
on charges of corruption and incompetence began on Wednesday.

Most analysts said Prime Minister Chuan Leekpai's four-month-
old government would easily defeat the motion as it had taken
effective actions to prop up the crisis-ridden economy and was
popular with the markets.

The Indonesian rupiah remained confined to its early ranges as
the market ignored reports from a meeting between senior IMF
official Hubert Neiss and Indonesian coordinating minister for
Economy, Finance and Industry Ginandjar Kartasasmita.

Neiss said both sides had agreed on the best way to proceed
with a review of Indonesia's economic reform program and would
set up five groups to discuss monetary policy, the banking
system, the budget and subsidies, structural reforms and
restructuring of corporate debt.

There was no mention of the controversial currency board
proposal or any other system to stabilize the rupiah.

Neiss, who arrived in Jakarta on Tuesday, said earlier the
fund's executive board would only approve the IMF review two
weeks after its team completed its work in Jakarta.

Currency board

Dealers said the market had largely priced in a delay in the
release of the IMF's second $3.00 billion loan tranche, but
traders were reluctant to take positions in the rupiah amid
lingering uncertainty over the currency board.

"The market was focusing day by day on Indonesia and players
were increasing their dollar exposure...But now it looks like
nothing's going to happen soon so the funds are slowly
unwinding," said a currency analyst in Singapore. "But the
overall scenario is still negative...and they could take the
dollar even higher."

The Singapore dollar recovered from a brief dip below 1.61 to
the U.S. dollar, but its rise was capped by local bank dollar
bids around 1.6000/30.

In north Asia, the Taiwan dollar hits lows of T$32.82 against
the U.S. dollar on the yen's sharp fall and persistent commercial
demand for the U.S. dollar from importers meeting quarterly
needs.

The South Korean won was hit by dollar short-covering, but
corporate dollar offers were expected near the 1,500 per dollar
level.

Central bank figures showed Korea's current account turned to
a surplus of $3.87 billion in February from a $2.42 billion
deficit a year earlier.

The Bank of Korea raised its forecast for the 1998 current
account surplus to $18-$20 billion from a $5 billion surplus
previously.

The Hong Kong dollar touches three-month low of 7.7478 to the
U.S. dollar as local interest rates continued to soften on offers
from the Hong Kong Monetary Authority.

The New Zealand dollar extended its losses to well over a U.S.
cent after the central bank shocked the market by cutting
interest rates by a much larger than expected 150 basis points
and signaled further monetary easing in the quarters ahead.

Reserve Bank governor Don Brash said the outlook for Asia had
deteriorated significantly since the bank's last forecast in
December and the larger rate cut should keep inflation near the
center of its target range (0-3 percent) and reduce risks of a
sharp decline in economic activity.

The Australian dollar slid half a cent in sympathy with the
slump in the New Zealand dollar and yen.