Asian currencies rebound but fears persist over RI
Asian currencies rebound but fears persist over RI
SINGAPORE (Reuters): Asian currencies pulled sharply back from lows reached earlier yesterday after markets were rattled again by fears that Indonesia was on the verge of adopting a controversial plan to fix the rupiah's value.
"A lot of people were caught on the wrong side one way or another today. Nobody has any idea which currency is leading the way," a U.S. bank dealer in Singapore said.
"But basically the market was caught long of dollars after this morning," he added.
The thinly traded rupiah reached highs of 10,100 to the dollar on market rumors the government planned to peg the rupiah's value through a currency board -- which has been opposed by the International Monetary Fund and the United States -- at the weekend.
Dealers attached little credence to the talk, but noted that the rupiah could be easily moved by relatively small transactions due to a lack of liquidity in the market.
"The market's just confused. They don't want to trade this currency anymore," the dealer said.
The rupiah was earlier quoted at a low of 12,300 to the dollar on worries the IMF might delay its next disbursement of cash to Indonesia out of dissatisfaction with Jakarta's progress in implementing economic reforms.
But Finance Minister Mar'ie Muhammad said in a statement that Indonesia was optimistic the second $3 billion tranche from the IMF package would be released as planned.
He added that any differences in interpretation of the reform program drawn up by Indonesia and the IMF would be resolved soon.
Overnight reports out of Washington indicated U.S. President Bill Clinton's administration was dissatisfied with the outcome of envoy Walter Mondale's meetings with President Soeharto earlier this week.
A senior administration official was quoted as saying the results of the mission to Jakarta were "certainly less than we had hoped for".
News that Indonesia planned to subsidize importers of basic essentials by providing a fixed exchange rate of 5,000 to the dollar did little to calm the market as it resurrected the specter of the controversial currency board proposal.
In Malaysia, the ringgit bounced back above the 4.00 per dollar level following the rupiah's move.
But dealers said the market remained anxious about the health of Malaysia's financial sector despite the central bank's assurance that no banks, other than four already identified, needed a fresh capital injection to restore their health.
Across the border, the Singapore dollar recovered on aggressive U.S. dollar sales by U.S. banks from the 1.65 level.
Dealers said sharply higher overnight rates in the domestic money market also helped the Singapore dollar.
"The overnight rate shot up from 3.5 to around 9 percent. It's probably the MAS (Monetary Authority of Singapore) squeezing liquidity to protect the Sing dollar," a dealer said.
Forward rates for other Southeast Asian currencies also firmed as the market priced in a higher risk premium, dealers said.
"All the forwards are going up because the market is afraid of another crisis," the dealer said.
The Thai baht recovered with its neighbors and dealers said it should remain relatively resilient due to the market's improved perception of the country following U.S. praise of its reform efforts and offers of fresh IMF funding.
Thailand said it had no plan or immediate need to seek additional foreign funding of its reforms through the IMF, which has already arranged a $17.2 billion bailout package for the country.
The Philippine peso finished higher as a lack of corporate dollar demand cushioned its early falls, but dealers said its fate would continue to hinge on developments in the region.
The Taiwan dollar was depressed by declines in Southeast Asian currencies and the yen as well as losses in regional stock markets after Wall Street's steep overnight drop.
The South Korean won also slipped as the stock market, a major prop for the currency in recent sessions, lost more than 2 percent.
The Hong Kong dollar was flat while forwards shed their gains in the face of the stock market's rebound and firmer regional currencies.
The Hong Kong Association of Banks said it was leaving deposit rates unchanged after its regular weekly meeting.
The Australian dollar was troubled again by Asia's woes, ending half a cent weaker.