Asian currencies perk up on Soeharto's poll pledge
Asian currencies perk up on Soeharto's poll pledge
SINGAPORE (Reuters): Indonesian President Soeharto's promise of fresh elections in which he would not stand as a candidate cheered Asian currency markets yesterday, but dealers and analysts said the gains could prove short-lived.
The rupiah, which fell to lows of 16,000 to the dollar early in Singapore, shot toward the 11,000 level after Soeharto addressed the country in a live telecast.
The 76-year-old leader, under mounting pressure to resign in recent days, said he would hold elections under a new law as soon as possible and would not run again.
He added that he would lead the reform process as president and that any succession must follow the constitutional path, otherwise bloodshed and civil war would ensue.
His comments sparked hopes of a peaceful transition of power, boosting most Asian currency and stock markets.
But uncertainty over the timetable for elections and questions about whether a change in the country's leadership would result in any meaningful reform capped the gains.
"I don't think (it'll calm the people) because it postpones everyone's future. What the people want is some action as of now, while what Soeharto is saying is it will happen some day in the future," said Nilesh Jasani, regional strategist at Socgen-Crosby Securities in Singapore.
Markets were also plagued by fears of fresh outbreaks of violence in Jakarta ahead of Indonesia's Awakening Day today.
More than 8,000 students, gathered outside Indonesia's parliament, booed as Soeharto said he would not quit immediately and a number of stock brokers joined a 200-strong protest in the lobby of the stock exchange building.
Moslem leader Amien Rais said planned rallies to demand Soeharto's departure would go ahead today and he hoped they would be peaceful, but feared violence.
The mild rally in Asian currencies was also driven by a market long on dollars letting off some steam, dealers said.
"After Soeharto's comments, I was quite surprised people were selling dollars: as long as he remains president, it's not very good. But I guess people were quite long," a U.S. bank dealer said.
Earlier, major dealing rooms in Singapore reported selling dollars at the 16,000 level to Jakarta-based parties, but brokers did not appear to have seen this business.
Dealers said the market was very edgy and volatile, with screen quotes for the rupiah not necessarily reflecting deals done by phone.
Outlook
Signs Indonesia's economic crisis was increasingly being held hostage to its political and social troubles would also depress the outlook for the rupiah.
"I won't be surprised (to see the rupiah go to 17,000) because it's fairly thin at the moment, so anybody asking for a price at 13,000 will be given at 14,000. It's sporadic trading but the prices are made with bigger and bigger spreads," said Chia Woon Khien, head of Asian research at SE Banken.
The World Bank and Asian Development Bank have postponed loans to Indonesia and private talks to restructure $80 billion in corporate debt have been rescheduled for early June from May 26.
Elsewhere, the Singapore dollar, one of the more actively traded currencies in the region, popped back through the 1.65 level on stop-loss buying and talk oil-rich Brunei was offering U.S. dollars above 1.66.
But traders said the currency showed further downside risks as the market was treating it as a proxy for the region and selling it on a perception it was overvalued.
The ringgit reached the high end of its 3.80-3.90 range to the U.S. dollar and the Thai baht rose toward the 39 level after drifting towards 40 earlier.
The Philippine peso came off its lows after Soeharto's speech, but the market appeared to ignore news that the January-March merchandise trade deficit fell to $1.22 billion from $2.895 billion a year ago.
The Philippine central bank cut its key overnight rates by 25 basis points each, signaling its confidence in the peso.
The Taiwan dollar held up after rebounding from opening lows of T$33.950 as the central bank sold U.S. dollars to stem its slide, Taipei dealers said.
The Australian dollar also crept higher in reaction to Soeharto's election promise, steering clear of earlier 12-year lows, which had prompted intervention by the Reserve Bank.