Asian currencies mixed late, Indonesia concerns dominate

Asian currencies mixed late, Indonesia concerns dominate

SINGAPORE (Dow Jones): Asian currencies were mixed late
Friday, as U.S. Federal Reserve Chairman Alan Greenspan's
relatively benign testimony overnight did little to neutralize
concerns over heightened political tensions in Indonesia, dealers
said.

However, the Indonesian currency took a breather Friday in
relatively calm trading, following its giddy gyrations earlier
this week, and was flat from Thursday. The rupiah's steady
undertone kept the other Southeast Asian currencies, which were
mixed, wedged in narrow trading ranges.

"Everybody's taking stock of what happened this week," said a
dealer at a European bank. "Nobody wants to stick their neck out
to do anything."

In North Asia, intervention by their respective central banks
had divergent effects on the South Korean won and the New Taiwan
dollar. While the South Korean central bank - worried about the
relative strength of the won - pushed the local currency lower,
Taiwan's central bank defended the local currency, pushing it
higher against the U.S. unit, dealers said.

Greenspan's seemingly upbeat outlook for sustainable growth
and contained inflation in the U.S. has reduced the odds of a Fed
tightening next month, keeping the interest-rate sensitive
Philippine peso buoyed. Other Asian currencies, however, showed
little reaction to his comments as domestic concerns in Asia
overruled.

Many analysts say they aren't prepared to predict that U.S.
interest rates will be kept on hold when the Federal Open Market
Committee meets Aug. 22. Analysts say they are still waiting for
the release of several key U.S. economic data in the next few
weeks.

"Greenspan sounded dovish, but he's not," says Philip Wee,
treasury economist at Standard Chartered Bank. "He's still
concerned about the inflationary risk from the labor market."

Delivering a semiannual report on monetary policy to the
Senate Banking Committee Thursday, Greenspan didn't rule out the
prospect of another interest rate increase this year. However,
his warnings about inflation risks were considerably less dire
than they were just five months ago.

Nonetheless, Greenspan warned that "it is much too soon" to
conclude that inflation has been tamed. He said that tight labor
markets and rising energy prices could still stoke inflation.

Analysts said the rupiah, rather than U.S. rates, is expected
to continue dictating the direction of Southeast Asian currencies
in the coming weeks, especially after President Abdurrahman
Wahid's defiance of parliament Thursday renewed concerns over his
hold on power.

Wahid's refusal to submit to parliament's questioning Thursday
over the dismissal of two senior ministers earlier this year has
set the stage for a confrontation during the mid-August meeting
of the People's Consultative Assembly, or MPR, the only body that
can unseat him, analysts said.

Despite the political anxiety, the Indonesian rupiah
consolidated in range-bound trading amid concerns local state
banks would defend it around Rp 9,150 to Rp 9,200 to the dollar.

Several major offshore banks are also planning to bail out of
their long dollar positions, dealers said.

Although the U.S. currency could continue to correct lower,
most analysts expect the dollar to rebound back to Rp 9,400 to Rp
9,500 levels ahead of the August MPR meeting. The rupiah will
likely drag the other Southeast Asian currencies lower, analysts
said.

In Jakarta, the rupiah closed lower at Rp 9,025 per dollar in
late trading on Friday compared to Rp 8,890 as the currency
market awaited for the President's response to the Thursday
questioning by the House of Representatives over the recent
sacking of two high profile ministers.

Investors were awaiting Wahid's written response later Friday
to parliament's questions over the dismissal of the two
ministers.

Greenspan's testimony supported the Philippine peso Friday.
The dollar was at 44.400 pesos, down from Thursday's close of
44.585 pesos.

In Thailand, the dollar was at 40.315 baht, up from 40.255
baht late Thursday.

Against the Singapore dollar, the U.S. currency was at
S$1.7469, little changed from S$1.7462 late Thursday.

In Taipei, spurred probably by the adverse impact of foreign
equity outflows on the local currency, the central bank
intervened aggressively, causing a retreat in the U.S. currency
vis-a-vis the New Taiwan dollar.

The U.S. dollar closed at NT$31.019, down from Thursday's
close of NT$31.086 and below its intraday high of NT$31.110
Friday.

In contrast, dollar-buying by the government-linked Korea
Development Bank - after the government recently expressed its
concern over the relative strength of the local currency -
weighed on the South Korean won.

The dollar closed at 1,112.70 won, up from Thursday's close of
1,111.60 won.