Asian currencies lower late, peso slides to 18-month low
Asian currencies lower late, peso slides to 18-month low
SINGAPORE (Dow Jones): Asian currencies are mostly lower late Tuesday led by the peso, which slumped to an 18-month low amid a bribery scandal that threatens multilateral loans.
The rupiah was another casualty on the day, as it handed back much of its recent gains on concerns a cabinet reshuffle by Indonesian President Abdurrahman Wahid could trigger a backlash from coalition parties.
In Manila, a bribery scandal surrounding the passage last week of an electricity reform bill through the House of Representatives threatens to delay the disbursement of more than $800 million in loans from the International Monetary Fund, Asian Development Bank and World Bank.
Two lawmakers say they were paid 500,000 pesos each to vote for the government legislation. The claims may discourage Congress from ratifying the bill into law. Opposition parties also demand a full independent inquiry, which could delay a final vote by the upper house of parliament.
Disbursement of these loans is contingent on these laws being approved.
Fears of higher U.S. interest rates are also hurting the peso.
Indeed, local market participants will be keeping a close watch on the central bank in coming days for any signs that monetary policy will be tightened to preempt a looming increase in U.S. interest rates.
While Philippine inflation remains benign, some analysts believe the central bank on Friday may increase its overnight borrowing rate to 9 percent from 8.75 percent to cushion the impact of expected U.S. rate hikes.
This could help relieve pressure, at least temporarily, on the peso.
The dollar rose to 41.375 pesos against the dollar early in the day - its highest level since 41.650 pesos on Oct. 27, 1998 - before retreating to 41.333 pesos near the end of local trade, up from 41.275 pesos previously.
A decision by Wahid to dismiss two economic ministers, apparently in a bid to show the IMF he is serious about pushing ahead with economic reforms, has generated concerns of a backlash within the ruling coalition.
Removed from the cabinet were Minister of Trade and Industry Jusuf Kalla and Minister of Investment and State Enterprises Laksamana Sukardi.
But Laksamana, a member of Vice-President Megawati Sukarnoputri's Democratic Party for Struggle, or PDI-P, is replaced by Rozy Munir, who is affiliated with Wahid's National Awakening Party.
This may risk the "wrath" of Megawati's party that now holds only two posts in the cabinet, says Philip Wee, analyst with Standard Chartered.
These fears pushed the dollar back up toward Rp 8,000 - erasing almost of all of Monday's gains - and sent local stocks tumbling 2 percent.
The dollar on Monday fell to Rp 7,845 after IMF acting managing director Stanley Fischer said he expects the fund to disburse the next $400 million installment of a $5 billion loan to Indonesia by the end of May.
But by late Tuesday, the dollar had risen to Rp 7,945.
In neighboring Singapore, the local dollar fell slightly as traders squared positions ahead of a slew of key economic data out of the U.S.
The issue Thursday of advance gross domestic product figures for the first quarter, and an employment cost index will provide more clues as to how aggressively the Federal Reserve is likely to lift U.S. interest rates.
The U.S. dollar was at S$1.7030, up from S$1.7002.
Elsewhere the baht weakened on heavy U.S. dollar buying, most notably by one Hong Kong-based bank. But traders export exporter orders to buy baht will cap any dollar strength at around 38.050 baht.
The dollar late in the day was at 38.030 baht, up from 37.935 baht previously.
In North Asia, the New Taiwan dollar slipped as foreign fund outflows from equity sales continued to pressure the local currency.
The U.S. dollar ended trade in Taipei at NT$30.575, up from NT$30.566.
However, the won bucked the regional downtrend to end slightly higher at 1,108.3 to the dollar, compared with 1,108.8 won late Monday.