Asian currencies tumble as volume shrinks

Asian currencies tumble as volume shrinks

SINGAPORE (Reuters): Shrinking year-end liquidity coupled with corporate demand for dollars drove several Asian currencies to fresh lows yesterday even though the South Korean won -- the instigator of recent regional woes -- recovered.

Dealers said liquidity was shrinking as players wound down for the end of the year, causing bid/offer spreads to double or even quadruple.

The Indonesian rupiah and Thai baht were among the worst hit as interbank activity practically dried up and even the Malaysian ringgit surrendered its recent stability, spinning to new depths in late afternoon trade.

"There are almost no interbank players in the baht. The mid- sized banks are not quoting dollar/rupiah and the demand for dollars is still very largely from corporates," said Ishak Ismail, market intelligence analyst at I.D.E.A. in Singapore.

"One million dollars can move the rate by 50 basis points, so it's kind of ridiculous. The demand for dollars is still there, but the supply isn't," he said.

The already edgy rupiah was undermined by market worries about Indonesian President Soeharto's health after he canceled a trip to a regional summit in Malaysia which began on Sunday.

The Thai baht was battered further by news the country's foreign reserves had fallen $2.0 billion to $26.3 billion in the fortnight to November 28.

The baht was at new lows of 47.75/48.10 to the dollar onshore at 1050 GMT against 45.90/46.10 about five hours before. The offshore rate was at 46.90/47.40 against 45.30/60.

Dealers said its descent was intensified by stop-loss dollar buying and exporters holding back dollar sales. " After 45 broke, I think people were just rushing in there buying all the way up. I wouldn't say it's panic, but it's a certain stop-loss level, which at any price they have to hit it," a foreign bank dealer in Bangkok said.

The Malaysian ringgit caved in to mounting pressure and skidded through a series of new lows in thin afternoon trade, quickly eclipsing its previous record of 3.8650.

It stood at 3.9075/175 to the dollar after hitting a low of 3.9250, against 3.8155/255 six hours earlier.

Even the once resilient Singapore dollar fell by four big figures, tumbling through the technical and psychological support of 1.68 to the U.S. dollar.

The Singapore dollar has lost more than five percent of its value against the U.S. dollar since the start of December, with the market believing it needed to weaken to remain competitive against other regional currencies.

It stood at 1.6835/65 to the U.S. dollar, its lowest level since March 1992, against 1.6600/30 earlier.

"Fundamentally, the Sing is sound. It's depreciated substantially today, but overall it has to if it's going to stay competitive in the region," said a treasury manager at a U.S. bank.

The Philippine peso finished at a new low of 38.853 to the dollar against a previous 37.36 close.

It breached its volatility bands twice as banks piled into the dollar amid sharp drops in other Southeast Asian currencies. The central bank sold dollars at 38.107 and at 38.480 pesos and further falls were limited by the third volatility band.

"There's panic in the market ... It's sentiment that's driving the peso lower," said a trader at a large commercial bank in Manila. He said persistent volatility in regional currency markets had fueled demand for the rising dollar from traders and companies.

Fears the peso could soon reach 40 to the dollar dragged Manila shares prices down, causing the main index to end down 1.89 percent at 1,819.67.

In north Asia, the won, which has lost half its value against the dollar in a matter of weeks, outshone its neighbors, rebounding on long dollar liquidation by exporters after intervention by the central bank. I t ended at 1,563.9 to the dollar, at its 10-percent upper limit, against Friday's 1,710 close.

The won opened firm on expectations of central bank intervention and then gained further when the bank did step in for the second trading day to counter dwindling dollar sales, dealers in Seoul said.

The Taiwan dollar ended at T$32.746 to the U.S. dollar, near a 10-year low, against a previous T$32.524 close.

The Hong Kong dollar scarcely budged from the brink of the key 7.75 level to the U.S. dollar, ending only modestly weaker as a lack of trading interest towards the year end cushioned it for sharp declines in other Asian currencies.