Asian currencies upbeat as Indonesia dithers

Asian currencies upbeat as Indonesia dithers

SINGAPORE (Reuters): Asian currencies were slightly more upbeat yesterday as the U.S. dollar lost steam against the majors, but dealers said trade was relatively slow and lacked a clear trend.

The Indonesian rupiah languished in a narrow band as interest dwindled in the face of continuing uncertainty over Jakarta's plans to implement a currency board system.

Comments by the new central bank governor, Sjahril Sabirin, provided few new clues and were largely shrugged aside.

"The market just can't be bothered at the moment. The rupiah has found some equilibrium between 9,000 and 10,000 (to the dollar) for the time being," a U.S. bank dealer said.

Sjahril told a news conference he wanted to stabilize the rupiah "at a rate affordable to the public" and a currency board system was "an attractive way to stabilize trade".

He said the central bank was still assessing whether conditions for a currency board were in place in Indonesia.

Minister of Finance Mar'ie Muhammad said on Monday the final decision on the currency board rested with President Soeharto.

The United States, European governments and the IMF (International Monetary Fund) have criticized the plan and said Indonesia needed to address the more urgent issue of its massive corporate debt obligations first.

President Bill Clinton said he planned to send former Vice President Walter Mondale to Indonesia for talks on the crisis.

Elsewhere, the Thai baht held onto early gains after the government announced a host of new economic targets and raised taxes on various products, including gasoline.

Dealers said the new targets reflected greater realism on the government's part and boded well for the baht in the longer-term, though its immediate rise would be hampered by corporate dollar demand around the 43.50/80 levels.

The Malaysian ringgit rose after comments by government economic adviser Daim Zainuddin that Malaysia was willing to give up a policy of granting preferences in areas like equity ownership and property prices to ethnic Malays.

Dealers said such a move would allow non-Malays and foreigners to pump badly needed capital into local companies, but they added that the ringgit would run up against dollar demand around the 3.70 level.

The Singapore dollar was lifted by its neighbor's rise and the dollar's softening against the yen, but dealers said gains would be blocked by buying of the ringgit/Sing dollar cross and caution ahead of Friday's national budget.

"I'm more bullish on the ringgit/Sing cross. It should go higher to 45.00 or even 50.00. I think the Singapore dollar is a bit overvalued and eventually the cross should correct," a U.S. bank dealer said.

The Philippine peso shrugged off a ratings downgrade by Standard and Poor's Corp (S&P) as a lack of corporate dollar demand and a calmer tone in regional currency markets limited the damage.

The South Korean won finished stronger as some banks squared their dollar positions after failing to push the dollar above 1,670 won.

The Taiwan dollar was supported by the U.S. dollar's softer tone and the stock market's strength.

The Hong Kong dollar and forwards were little changed in slow trade due to calm in regional markets.