Asian currencies mixed late, rupiah rally loses its steam
Asian currencies mixed late, rupiah rally loses its steam
SINGAPORE (Dow Jones): Asian currencies met different fates late Monday. The Indonesian rupiah posted mild gains on the removal of General Wiranto from his cabinet post while the Korean won retreated from its recent highs on central bank verbal intervention and a stock market plunge.
The rupiah's early rally lost its steam by late Monday as market players chose to focus on the protracted and confusing run-up to President Abdurrahman Wahid's decision to suspend Wiranto over his alleged role in last year's bloodshed in East Timor.
"What we would have loved to see is a clear unambiguous message," said Simon Flint, currency strategist with Bank of America. "It's mildly positive; it could have been so much better."
The U.S. dollar is trading at Rp 7,253 late Monday, down from Rp 7,300 late Friday, but above its intraday low of Rp 7,235 early Monday.
For the last two weeks, the rupiah had been held hostage by the public long-distance row between the two officials, which began when Wahid said while on an overseas visit that he would ask for the general's resignation upon his return to Indonesia.
On Sunday, Wahid met with Wiranto and announced that the minister would remain part of the government while the attorney- general's office conducted a new formal inquiry into the violence that followed East Timor's vote for independence.
But in a surprise reversal Monday morning, Wahid suspended the powerful security and political affairs minister from his cabinet.
While the move is significant, reducing the military's once powerful grip on the country and reinforcing Indonesia's fledgling democratic process, analysts said the rupiah could have traded much higher had Wahid been more decisive and waited to discuss the matter until he returned to Indonesia.
"The rupiah could have gone to Rp 7,100 (against the U.S. dollar) if there had been more of a clear signal," Flint at Bank of America said.
Although it managed to touch its strongest level since November 1997, the South Korean won took a step backward late Monday after the central bank suggested it would intervene to support the U.S. dollar.
The U.S. dollar was quoted at 1,126.0 won late Monday, sharply higher than 1,115.3 won late Friday.
Late in the session, an official at the Bank of Korea said the central bank is very worried about the speed of the won's appreciation against the dollar and that it's prepared to take steps to stabilize the won/dollar exchange rate.
"Given the deteriorating trade balance and the inflow of foreign funds into the local stock market, we are very worried about the rapid rise of the won's value," the official said, requesting anonymity. However, he didn't specify what those measures might be.
The Bank of Korea's verbal intervention follows similar remarks Monday morning by an official at the Ministry of Finance and Economy.
Meanwhile, after an initial rise, the Thai baht and the Singapore dollar faltered as the rupiah lost its upward momentum. Against the baht, the U.S. dollar was quoted at 37.520 baht late Monday, up from 37.475 baht late Friday, but below 37.405 baht early Monday.
And versus its Singapore counterpart, the U.S. unit was also quoted at S$1.6934 late Monday, barely changed from S$1.6935 late Friday, and higher than a low of S$1.6910 early Monday.
Analysts say the Singapore dollar is still hampered by the yen's relative weakness to the U.S. dollar since the currency is monitored against a trade-weighted index.
In Manila, the U.S. dollar ended trading at 40.375 pesos, weaker than 40.450 pesos late Friday, while the dollar ended trading in Taipei at NT$30.646, up from NT$30.613.