Asian currencies shudder as Indonesian rupiah crumbles

Asian currencies shudder as Indonesian rupiah crumbles

SINGAPORE (Reuters): The Indonesian rupiah broke down on
yesterday amid mounting jitters about the country's debt crisis,
a mere week after a package of stiff new IMF-led reforms sparked
hopes of real change.

It dived 20 percent to 15,000 per dollar within the first hour
of Asian trade, casting a shadow over other Asian currency and
stock markets.

Dealers said trading was extremely erratic, with bids from
brokers at levels of 16,500 and 17,000.

In Jakarta, there were reports banks had cut their interbank
lines because they did not want to trade in current market
conditions, while Singapore dealers also complained of a
dwindling interbank market.

"People just don't want to quote this currency any more.
There's still a lot of (dollar) buying interest from U.S. funds,
Jakarta centers, everywhere. And nobody has any dollars to
offer," a U.S. bank dealer in Singapore said.

The rupiah stood at 11,600/12,000 to the dollar at 0920 GMT
after Bank Indonesia intervened repeatedly, selling dollars for
rupiah at the 14,000 and 13,500 levels early and then at 12,500
in late trade.

A senior government official said Indonesia would step up
intervention in the foreign exchange market and soon draw on an
existing $2 billion stand-by loan to defend the rupiah.

But dealers said the market was still overwhelmingly in favor
of the dollar following the government's failure to convincingly
address the country's corporate debt, estimated at $65 billion,
and growing bank liquidity problems.

Central bank governor Soedradjad Djiwandono said on Wednesday
the government would soon announce guidelines to resolve
liquidity and solvency problems in the private banking sector.

The rupiah was also hit by political worries after hints
Research and Technology Minister B.J. Habibie, viewed negatively
by the markets, may be President Soeharto's preferred vice-
presidential candidate in March polls.

Analysts said Indonesia urgently needed to find ways to
reschedule or repackage its mountain of corporate debt.

"Everyone knows now that they're not paying up...Although
they've said that they won't bail out the private sector debts, I
think they'll have to do something," said Chia Woon Khien, head
of Asian research at Skandinaviska Enskilda Banken.

The rupiah's dizzying drop did not wreak the usual havoc in
Asian currency markets as Indonesia's problems were increasingly
being perceived as a domestic crisis, dealers and analysts said.

The Malaysian ringgit hit a morning low of 4.58 to the dollar,
but then recovered to 4.4900/00 at 0920 GMT, still down from its
late Wednesday levels of 4.4350/650.

The Singapore dollar recovered some of its early losses, to
stand at 1.7585/1.7625 against the U.S. dollar from 1.7580/30
late on Wednesday.

The Thai baht fell to 54.20/40 to the dollar onshore against
53.70/53.75 late on Wednesday. Dealers said offshore baht hit an
early low of 55.30 in a knee-jerk reaction to the rupiah's drop.
It was at 53.20/70 at 0920 GMT.

"The baht would likely follow the rupiah's footsteps offshore.
A limited local corporate demand for dollars to pay off foreign
debt was offset by new inflow of foreign funds into the Thai
stock market," a foreign bank dealer in Bangkok said.

The Philippine peso stumbled to 42.72/82 per dollar against
its previous 41.90 close as the central bank kept out of the
market after days of indirect intervention.

Central bank deputy governor Alberto Reyes said the bank would
open its one-month lending facility to banks which cut their
dollar overbought positions and would buy bank treasury bill
holdings at market rates to add liquidity to the system.

The South Korean won fell to 1,754/60 per dollar from
Wednesday's 1,723 close as the rupiah's drop fanned speculative
dollar purchases.

But traders said dollar sales by exporters and demand for the
won before the Lunar New Year break would cushion its fall.
The Taiwan dollar surrendered its early gains drawn from the
yen's rise and strong local cash demand ahead of the holidays, as
players fretted about the rupiah.

The Australian dollar lost half a cent to $0.6578/85 on
worries the rupiah's plunge would trigger another cycle of
competitive devaluations.

The Indian rupee was at 38.725/755 to the dollar from a
previous 38.75/80 close and dealers said it was likely to be
rangebound as the market absorbed the central bank's measures to
tighten liquidity.

The following table shows the drop in value of Asian
currencies since the crisis began in July. Currency movements are
in percentage terms and reflect the local unit's fall against the
dollar, not the dollar's rise.

Currency Current value Move since July 1

-----------------------------------------------------

Indonesian Rupiah 11,500.00 -78.85%

Thai Baht 54.20 -52.21%

Korean Won 1,754.00 -49.37%

Malaysian Ringgit 4.51 -44.12%

Philippine Peso 42.72 -37.97%

Taiwan dollar 33.71 -17.67%

Singapore dollar 1.76 -18.68%

Hong Kong dollar 7.74 0.06%

Indian rupee 38.73 -7.53%