Asian currencies tread water

Asian currencies tread water

SINGAPORE (Reuters): Most Asian currencies remained in well-
worn territory yesterday as the stricken Korean won managed to
stave off further attacks with the help of its central bank.

Dealers said the Bank of Korea stepped in to rescue the won
from the brink of the psychological 1,000-to-the-dollar level in
opening trade and later lowered its intervention level.

The won ended at 989.90 to the dollar after the central bank
sold dollars aggressively at 999.90 won and then at 989.00 won.

The Bank of Korea backed its action with strong verbal
support, discouraging heavy won sales for the time being.
A central bank official said the bank would strenuously support
the won's "Maginot Line" of 1,000.

"We will absolutely defend the 1,000 won level to the dollar,"
a central bank official said. "To this end, we will implement
stronger measures."

Singapore dealers said the central bank's efforts had caused
won non-deliverable forwards to come off their highs as well.

"The reason the forwards are moving to the left is because
people are probably saying that the spot Korean won is not going
to pass 1,000 anytime soon. They think the central bank is not
going to let it," said one dealer.

But not everyone was convinced.

"Any strengthening in the won would be a correction. I don't
foresee any help for the won in the short term," a senior
regional currencies dealer in Singapore said.

Korea's overnight call loan rate shot to a yearly high of
14.50 percent as merchant banks, saddled with bad debts following
major bankruptcies, sought hard cash to buy dollars.

The government said it would soon announce a financial
stabilization package, including relief for the troubled banks.

Elsewhere in North Asia, the Taiwan dollar ended weak but off
its lows on the won's recovery and speculation the central bank
had intervened to defend the Taiwan dollar at the T$31 level to
the U.S. dollar.

It ended at T$30.992 against Monday's T$30.985.

Dealers said the Taiwan dollar's direction would continue to
be driven by the won's moves due to intense competition between
the two territories in key export markets.

"The only reason for the Taiwan dollar to cross 31.00 is if
the won goes past 1,000," a Singapore dealer said.

The Hong Kong dollar eased to 7.7315/45 to the U.S. dollar
from 7.7295/10 at Monday's close, but dealers said there was
little impact on the interbank market from Monday's run on
International Bank of Asia.

However, some dealers said they expected borrowing costs of
smaller banks to rise after the incident. Financial Secretary
Donald Tsang said Hong Kong authorities would help International
Bank of Asia meet its obligations.

In Southeast Asia, the Thai baht slid to 37.90/38.10 to the
dollar onshore from 37.10/37.30 late on Monday as initial
euphoria over the appointment of new Prime Minister Chuan Leekpai
faded.

Dealers said the market was awaiting details of Chuan's new
cabinet and concrete steps to rehabilitate the financial sector.

Chuan was quoted in an interview with a Thai newspaper as
saying he expected to be able to revitalize confidence in the
immediate term to halt capital flight from Thailand and solve
liquidity problems.

The Philippine peso rose to close at 33.82 to the dollar from
a previous 34.27, after breaching its first volatility band at
34.74 and hitting a high of 34.48.

Manila traders said the peso was boosted by large inflows from
overseas contract workers repatriating their wages and talk a
Hong Kong firm might have moved some funds to Philippine-based
banks to buy shares in a local beer and food conglomerate.

After the market close, central bank governor Gabriel Singson
said the peso's depreciation had been "over-exaggerated" and it
was likely to correct in line with economic fundamentals.

The Indonesian rupiah hovered between 3,310 and 3,330 to the
dollar, trapped between corporate dollar demand and fears of
concerted central bank intervention.

Dealers said the government's pledge on Monday to close 16
unhealthy banks despite potential political fallout had boosted
support for the rupiah.

Joint interventions by the central banks of Japan, Singapore
and Indonesia to buy the rupiah last week had also helped
stabilize the currency for the time being.

The Malaysian ringgit edged up to 3.2960/60 to the dollar from
Monday's 3.3150/250, but activity was confined to a very narrow
range, dealers said.

A Standard & Poor's report saying it did not see Malaysia
facing the same problems as Indonesia and Thailand helped prop up
the ringgit, dealers said.