Asian currencies stable, Indonesia worries remain

Asian currencies stable, Indonesia worries remain

SINGAPORE (Reuters): Asian currencies held up but lacked the ability to move forward on Tuesday as hedge fund dollar sales met corporate dollar demand amid a dearth of fresh leads.

The first meeting of Indonesia's new cabinet was largely ignored as it told the market nothing new about the government's plans to cope with the economic crisis or restore the rupiah.

Coordinating Minister for Economy and Finance Ginandjar Kartasasmita said Jakarta was still considering a currency board system and other ways to prop up the rupiah.

He told reporters after the cabinet meeting that Indonesia and the International Monetary Fund were working to understand each other, but that the country would go ahead with economic reforms with or without the IMF.

Traders greeted Ginandjar's comments with a barely concealed yawn.

"This seems to be part of their gimmick. They keep saying they're considering it (the currency board) so the market cannot bring the dollar higher," a U.S. bank dealer in Singapore said.

"But if they do go ahead with it, offshore's going to trade the rupiah at a rate of 10,000 to the dollar and onshore at 5,000. So I would just stay out of the rupiah," she added.

The rupiah stagnated around the 10,100 per dollar level, largely ignoring news international ratings agency Fitch IBCA had downgraded Indonesia's long-term foreign currency rating, citing the country's deteriorating political and economic situation and rift with the IMF.

Australia's Foreign Minister Alexander Downer said he did not believe Indonesia was on the verge of adopting the much-opposed currency board system.

Downer is due to fly to Washington on Wednesday to lobby the U.S. government, the World Bank and the IMF for more flexibility on Indonesia's bail-out package.

Elsewhere, the Thai baht remained upbeat but dealers said its rise was being blocked by corporate dollar demand just below the 40.00 per dollar level.

The Malaysian ringgit was caught in a narrow 3.70-3.80 range against the dollar. Dealers said its rise was being hampered by corporate dollar demand but companies were reluctant to buy dollars at higher levels.

The Singapore dollar pulled off its overnight lows, but its gains were capped by U.S. dollar buying at the 1.6050 level by U.S. investment houses, dealers said.

The market was encouraged by the IMF's annual review of Singapore, which said economic growth was expected to slow this year but added that local banks and finance companies appeared sound.

The Philippine peso strengthened on inflows to the stock market and optimism about its outlook, given the baht's gains, but dealers said its gains were clipped by uncertainty about Indonesia.

The South Korean won was confined to a tight range and dealers said the government appeared to be supporting the dollar at below 1,500 won to help negotiations with the IMF on lowering interest rates.

The Taiwan dollar gave way to active commercial demand for the U.S. dollar after rising initially on foreign inflows to the stock market and non-deliverable forward sales of the U.S. dollar.

The Hong Kong dollar softened slightly and forwards extended two days of sharp losses as local interbank rates dropped to levels not seen since before the Asian currency crisis disrupted markets last year.

Dealers attributed the easier rates to abundant interbank liquidity and a rally in local stocks.