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.