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.