Asian currencies hold up as Soeharto gives no clues

Asian currencies hold up as Soeharto gives no clues

SINGAPORE (Reuters): Asian currencies held up but steered
clear of their early highs yesterday after Indonesian President
Soeharto failed to mention a currency board in his eagerly
awaited inauguration speech.

Dealers and analysts said the market was focused on the
Indonesian rupiah, which would remain hamstrung on uncertainty
over its fate due to a lack of clear policy direction from
Jakarta.

"The market doesn't want to do anything with the rupiah
because they have no clue whether it's going to 7,000/8,000 (to
the dollar) or to 14,000," a U.S. bank dealer in Singapore said.

Expectations Indonesia might still adopt a currency board to
peg the rupiah, or announce some form of curbs on foreign
exchange trading, left traders nervous and reluctant to take a
view on regional currencies.

"A decision on the currency board is needed to break the
stranglehold of the expected volatile trading range, and
establish a firmer long-term trend," said

Chin Loo, strategist at Banque Paribas in Singapore.
But Southeast Asian currencies maintained a downward bias and
were unlikely to firm beyond key dollar supports at 1.60
Singapore dollars, 3.80 ringgit, 43.00 baht and 9,000 rupiah, she
said in a daily report.

The rupiah reached an early high of 9,600 to the dollar as
traders covered their positions ahead of Soeharto's speech,
taking encouragement from the International Monetary Fund's
conciliatory words overnight.

In a sign that a stand-off between Jakarta and the IMF might
be easing, IMF First Deputy Managing Director Stanley Fischer
said the fund was ready to be flexible in renegotiating
Indonesia's reform program to help reduce hardship for the
population.

"Initially, the market was quite bullish on the rupiah. It
looked like Indonesia's relationship with the IMF was improving
after Suharto's re-election," the U.S. bank dealer said.

"But there was some disappointment when his speech didn't
mention the currency board system. And we saw quite a bit of
dollar buying by a Hong Kong-based investment house," he added.

Soeharto, re-elected for a seventh five-year term on Tuesday,
did not make any major policy announcements or cite specific
measures to ease the country's economic troubles in his
inauguration speech.

He said the crisis was an "extremely difficult test" and that
Indonesians must tighten their belts.

Elsewhere, the Singapore dollar fell from a peak of 1.6140 to
the U.S. dollar, triggered by early stop-loss sales of the U.S.
currency at the 1.63 level out of Sydney.

Dealers said it continued to be driven by moves in the rupiah
and Malaysian ringgit and was likely to stay well within its
recent 1.6050-1.6500 range.

The ringgit also came off a high of 3.81 to the dollar after
the U.S. unit drew strong bids at the 3.80 level, but it was seen
capped at 3.95.

Concerns about the health of Malaysian financial institutions
continued to plague the market, although the ringgit took heart
from news Rashid Hussain had finalised its purchase of Sime
Darby's ailing Sime Bank.

The Thai baht extended its recent gains on continued offshore
demand for investment purposes, but dollar demand from local
importers and companies limited its rise.

The Philippine peso ended slightly firmer in slow trade,
lifted by gains in regional markets and an absence of domestic
corporate demand for dollars.

The Taiwan dollar ended firmer but came off its highs after
the yen subsided against the U.S. dollar.

Taiwan's central bank governor Perng Fai-nan said the bank
would strive to maintain exchange rate flexibility and create an
environment for economic growth which would leave no room for
speculative attack.

The South Korean won strengthened amid abundant dollar
liquidity and hopes of strong trade data after a government
official said the trade account for the first 10 days of March
showed a $500 million surplus on a customs-cleared basis.