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.