Asian currencies mixed late, panic selling hurts rupiah
Asian currencies mixed late, panic selling hurts rupiah
SINGAPORE (Dow Jones): The Indonesian rupiah was driven
sharply lower by panic selling Thursday, prompting Singapore
monetary authorities to intervene in foreign exchange markets to
prevent their currency from being swept along, dealers said.
The rupiah had been pressured all week by concerns over
Indonesia's political and economic outlook, a softer yen, and
prospects for higher U.S. interest rates. But it was dealt
another blow Thursday by shocking comments from the country's top
economic minister questioning the wisdom of investing in
Indonesia.
Indonesia faces too much instability and social unrest to
appeal to investors, Coordinating Minister of Economy, Finance
and Industry Minister Kwik Kian Gie said in an interview with Dow
Jones Newswires.
"I never talk about foreign investment and things like that
because I'm realistic enough; if I were a foreign investor, I
wouldn't come to Indonesia," he said.
"The law enforcement is not there. But not only that, the
whole thing is so confusing. How can you come here?," he asked.
The rupiah reacted negatively, falling to nearly a seven-month
low against the dollar. The dollar touched 8,430 rupiah in
intraday trading, the strongest it has been against the
Indonesian currency since hitting Rp 8,492 on Oct. 14, 1999.
Near the end of Asian trading, the dollar was quoted at Rp
8,375, up from Rp 8,203 late Wednesday.
"Kwik is apparently unhappy with President Wahid's decision to
appoint two advisors to oversee the activities in his ministry,"
said Philip Wee, treasury economist at Standard Chartered Bank in
Singapore.
"It's difficult to see any respite for the (rupiah),
especially after it broke through key resistance at 8,200.
Neighboring currencies are in for a rough ride as well," Wee
said.
The Philippine peso, New Taiwan dollar, Singapore dollar and
Thai baht also traded lower for most of the day before the latter
two currencies recovered somewhat in the afternoon.
In the case of the Singapore dollar, dealers said the rebound
was at least partially driven by the Monetary Authority of
Singapore, which entered the market late in the afternoon to halt
the currency's slide.
The MAS has a policy of not commenting on its monetary
actions.
Dealers said the MAS' action was driven more by its desire to
show the market that it has control over its currency than any
significant concern about the currency's value relative to the
U.S. dollar.
The dollar has risen significantly against the euro, yen and
other world currencies on expectations that Federal Reserve
policy makers will raise short-term interest rates by a half a
percentage point next week.
Because the dollar strength is broad-based, and not aimed
specifically at the Singapore dollar, it is of less concern to
the MAS, analysts said.
"They (MAS) were just trying to send a message to the market,"
a dealer at a foreign bank said. "There was so much panic in the
market today...they just wanted to prevent undue volatility," he
said.
The MAS intervened after the dollar hit a 13-month high of
S$1.7351, dealers at three different foreign banks said. The MAS
sold dollars all the way down to the $1.7250 level, they said.
Late in Asian trading, the dollar was quoted at S$1.7265, down
from S$1.7301 late Wednesday.
The Thai baht spent most of the day battling poor sentiment
spurred by the expected U.S. rate hike, stock market outflows and
concerns over the pace of debt restructuring in Thailand.
At its high point, the dollar broke through a key 39.00 baht
resistance level for the first time since November 1999.
But the dollar reversed course in the afternoon after offshore
players, who held long dollar positions through swap contracts,
took profit on the dollar's rise, dealers said.
Late in the session the dollar was quoted at 38.815 baht, down
from 38.915 baht late Wednesday.
The Philippine peso closed lower on prospects for a widening
interest rate differential with the U.S., as well a rebel
uprising in the southern part of the country.
The dollar closed at 41.430 pesos on the Philippine Dealing
System, up from Wednesday's close at 41.370 pesos. Earlier in the
session, the dollar rose to a 19-month high of 41.440 pesos.
The New Taiwan dollar ended lower Thursday following a 2.5
percent drop in the local stock market index. Foreign
institutional investors, who helped boost the local currency in
recent months, sold a net NT$3.09 billion worth of Taiwan shares
Thursday.
The U.S. dollar closed at NT$30.752, compared with it's
previous close at NT$30.697.
Markets in South Korea were closed for a holiday.