Asian currencies pressured by dollar

Asian currencies pressured by dollar

SINGAPORE (Reuters): A disappointing response from the Group
of Seven (G-7) finance ministers to Asia's problems gave the U.S.
dollar renewed strength yesterday and put all the Asian regionals
under pressure.

But rather than stick together as a group, the Asian
currencies set off on individual paths downward with the
Indonesian rupiah out on its own in front.

"Indonesia is starting to be viewed in isolation," said a
currency strategist at a European bank in Singapore.

By 09:00 GMT the rupiah was down 7.8 percent on the day,
trading at around 9,500 to the U.S. dollar after being quoted at
around 8,800 late on Friday.

Other Asian currencies were down around one to two percent
over the same period.

"We look set for a period of yen weakness and dollar strength
which means the regionals will see little joy in the near
future," the strategist said.

But analysts say domestic developments will take greater
precedence over regional worries in the trading session ahead.

In Indonesia this means a focus on the prospects for a
currency board, the arrival of an IMF assessment team to
determine compliance to the economic reform program, and a watch
on political developments in the run up to the presidential
election.

Whether or not Indonesia will get a currency board is purely
up to President Soeharto, Indonesian Minister of Finance Mar'ie
Muhammad told a parliamentary committee in Jakarta yesterday.

But Mar'ie did not give any indication on the president's
thinking.

Analysts say the key to whether a currency board may be
implemented or not will be the inflation level and whether or not
this accelerates too fast following the rapid currency
depreciation.

"If Soeharto sees hyper inflation being sustained and
Indonesian corporates not in a position to participate in the
real economy, he might have no choice but to implement a currency
board." said Daniel Lian, Head of Asian Markets Research at ANZ
Investment Bank.

"I really don't see it coming before the presidential
election, and I still rate the probability less than 50 percent
after the elections," Lian said.

Meanwhile, the IMF team in Jakarta will be preparing a report
to the IMF's board in Washington which will decide whether to
approve a further disbursement of funds from the $43-billion
bailout package.

Elsewhere and enjoying a very modest slide in value today was
the Thai baht. Here the markets await a series of major
government announcements on Tuesday.

The first and main one being the long awaited three-year plan
to strengthen the country's battered banking and finance sector.

The plan will be announced along with the details of
Thailand's latest review by the IMF of its economic progress.
This review is expected to detail fresh economic targets and
announce the disbursement of a third tranche of the multilateral
bailout package.

Meanwhile, dollar strength against the yen and other majors
was keeping the Singapore dollar under pressure.

The Singapore dollar was down about one cent over the day with
dealers saying the focus was shifting to the Singapore budget due
out on Friday.