Asian currencies stable but sluggish

Asian currencies stable but sluggish

SINGAPORE (Reuters): Asian currencies held on to but failed to
extend their gains yesterday as traders responded sleepily to the
U.S. dollar's late retreat below 130.00 yen.

Chinese Premier Zhu Rongji's pledge to defend the Hong Kong
dollar's link to the U.S. dollar and firm ruling out of a yuan
devaluation also sparked little reaction.

The Hong Kong dollar remained steady while forward rates were
slightly easier in late trade.

Elsewhere in Asia, Indonesian Vice-President B.J. Habibie
reported comments on the use of a currency basket, including the
yen and U.S. dollar to stabilize the rupiah, inspired little more
than skeptical disdain.

"A currency basket would be quite similar to Thailand's
system. But if it didn't work there, the market sees no reason
why it would with Indonesia," a U.S. bank dealer in Singapore
said.

He said the rupiah remained trapped between dollar purchases
from Jakarta banks and offers from U.S. houses on Thursday.

Habibie, on a visit to Tokyo, was quoted by a Japanese
business group official as saying Jakarta would do whatever it
could to stabilize the currency.

But dealers said there was almost no trading interest in the
rupiah as the market awaited the IMF review of Indonesia's
economic reform efforts against a backdrop of conflicting policy
signals from Jakarta.

The Malaysian ringgit remained firm after climbing above the
3.67 per dollar technical barrier, but dealers said its rise was
being frustrated by dollar bids around 3.60/61 despite optimism
about economic measures, expected to be unveiled next week.

They said the ringgit's gains were driven more by straight
buying against the dollar and Singapore dollar as Wednesday's
massive unwinding of long baht/ringgit positions subsided.

"People are just reducing their baht/ringgit positions.
They've not got out of them completely," a senior currencies
dealer in Singapore said, adding that the ringgit would face
strong selling interest at 11.50 baht.

The Thai baht edged back towards 40.00 to the dollar as Prime
Minister Chuan Leekpai's government looked set to sail through a
no-confidence debate.

Dealers said the currency continued to benefit from a wave of
positive sentiment, but they were divided over its potential for
further gains.

"The baht should be very stable from here. It's almost found
its equilibrium at 40.00. People are talking about 35.00, but I
think that would be overdone," the U.S. bank dealer said.

The Singapore dollar languished below 1.60 to the U.S. dollar
as the market braced for a test of the 1.5950 resistance.

DBS Bank's prime rate cut on Wednesday, expected to be
followed by other local banks, spurred a rally in property stocks
but the currency market brushed it off as an expected response to
softening interbank rates.

The Philippine peso's early surge on weak corporate dollar
demand and a strong baht prompted banks and companies to unload
their dollar holdings, pushing the peso to a three-month closing
high.

The Bankers Association of the Philippines said the peso's
volatility band would be removed from Monday in view of the
relative stability of the exchange rate.

In north Asia, the South Korean won rebounded sharply on
corporate dollar sales above the 1,500 level, but traders said
volume thinned significantly in late trade due to caution about
the won's outlook.

The Taiwan dollar was lifted by the yen's recovery and inflows
of foreign equity funds to the stock market.