Asian currencies weaken as rupiah recoups early losses
Asian currencies weaken as rupiah recoups early losses
SINGAPORE (Dow Jones): Asian currencies weakened late Monday, as the Thai baht's steep decline overshadowed the market's relief that the meeting of Indonesia's top legislative body started smoothly, currency watchers said.
The Indonesian rupiah had recouped part of its earlier losses as political concerns were eased following President Abdurrahman "Gus Dur" Wahid's conciliatory tone in his address to the People's Consultative Assembly, also known as the MPR.
In late trading, the dollar was at Rp 8,625, marginally weaker compared with around Rp 8,600 last Friday. The dollar had climbed to as high as Rp 8,720 earlier in the day, but onshore dollar- selling contributed to the U.S. currency's retreat, dealers said.
Although financial markets had been anxiously awaiting the start of MPR meeting Monday, the Thai baht stole the limelight as offshore participants pushed it back below the 41 baht support mark to the dollar. The lower baht dragged the Singapore dollar and the Philippine peso lower.
Asian currency markets ignored favorable U.S. unemployment data issued last Friday which points to the increasing likelihood the Federal Reserve would hold interest rates steady later this month. The jobless rate stayed at 4 percent in July, but the tight labor market showed signs of softening.
In contrast to Gus Dur's confrontation with parliamentarians last month, the embattled president opened his speech with an apology for any failures, pledged to retain prudent economic policies, denied any rift with Vice-president Megawati Sukarnoputri and warned of an impending cabinet reshuffle. His speech was met with applause.
"It's surprising the rupiah didn't react that positively because the speech was good," said Mansoor Mohi-uddin, a foreign exchange strategist at UBS Warburg. "It was conciliatory, apologetic and it said all the right things on economic reforms."
The rupiah remained weighed by lingering concerns over Wahid's hold on to power, even though he is expected to survive the current MPR session, which will last for two weeks.
"The road is unlikely to be smooth and Wahid's challenge really starts only after the MPR concludes," says Steve Brice, foreign exchange strategist at Standard Chartered Bank. "Thus, the outlook for rupiah appreciation from here appears limited."
Brice said the rupiah's gains in the near term may be limited to Rp 8,400 to the dollar, with the Indonesian currency having already strengthened by more than 10 percent recently on expectations Wahid would be given a mandate to rebuild his cabinet and a grace period to push through economic reforms.
The rupiah brushed off Indonesian Senior Economics Minister Kwik Kian Gie's announcement Monday he was ready to step down voluntarily in the expected cabinet reshuffle. His remarks weren't surprising - Kwik had reportedly tried to resign on several occasions.
The Thai baht led the Asian market's decline, largely on offshore speculative trading and amid political uncertainty ahead of the country's general elections later this year, dealers said.
The dollar was at 41.115 baht, up from 40.550 baht late Friday.
The baht's losses helped put a halt to the Singapore dollar's recent rally. The U.S. dollar was at S$1.7262, up from S$1.7208 last Friday.
In Manila, the dollar was at 44.850 pesos, up from Friday's close of 44.635 pesos.
Elsewhere, concerns over a perceived delay in the Hyundai Group's restructuring efforts eroded the South Korean won.
The dollar finished at 1,117.30 won, up from Friday's close of 1,115.20 won.
In Taipei, a continued slump in the local stock market, with the benchmark index falling 1.6% Monday, dented the New Taiwan dollar, dealers said.
The U.S. dollar ended at NT$31.092, up from NT$31.070 late Saturday.