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.