Asian currency fate tied to Seoul move
Asian currency fate tied to Seoul move
SINGAPORE (Reuters): Saturday and Sunday are critical for Asian currencies as the market waits for South Korea to decide whether to seek aid from the International Monetary Fund (IMF), dealers said yesterday.
Korean Finance Minister Lim Chang-yuel told reporters yesterday, after talks with visiting IMF Deputy Secretary General Stanley Fischer, that Seoul would make a decision within three days whether to ask the IMF for standby loans.
"The whole market is monitoring the events over the weekend on whether they will agree to the IMF package or not. There is a great expectation they will but we have to wait and see for concrete details," said a dealer with a U.S. bank in Singapore.
The expectation Korea would indeed swallow its pride and seek IMF aid gave Asian currencies a much needed respite yesterday. Many rebounded from recent lows as players took profit on the dollar.
"The market is nervous about holding dollar positions over this weekend. There is a strong sentiment Korea will take an IMF package," said the dealer in Singapore.
After week-long abuse, the won posted a much welcomed gain yesterday to 1,065.0 to the dollar from Thursday's close at 1,139.0.
"We could see the dollar retrace back below 1,000 won if the IMF aid comes true," said the dealer with a European bank.
But if the weekend fails to deliver any concrete packages, dealers said the Asian currency market would definitely see renewed pressures on the won.
Dealers felt the natural valuation of the won, given the backdrop of the peninsula's massive foreign debt, was around 1,100-1,250 a dollar.
Asian currencies were mostly firmer, cheered by Korea's attempt to rectify its financial woes.
The local unit in Taiwan, Korea's closest export competitor for electronic products, greeted the news with a bounce towards 32.425 against the dollar compared to a 32.725 close on Thursday.
The Thai baht firmed to 39.70/83 compared to Thursday's 39.82/92. Its resistance was pegged at 39.50 to the dollar.
However, the baht's upside was capped by general caution over Thailand's economic reforms and the new government's decision on the fate of 58 finance firms due by December 7, 1997.
The Malaysian ringgit got a breather and firmed to 3.4700/800 after hitting a low of 3.5500 in New York on Thursday.
Dealers said players were seen locking in profits on the dollar's sharp rise earlier this week.
Malaysia's roller-coaster stock market, which saw an erosion of over four percent before ending 4.37 percent up yesterday, capped the ringgit's upside.
The Singapore dollar also got a respite and was quoted firmer at 1.5860/80 compared to over 1.6000 on Thursday.
"There were a lot of stop-losses on the dollar/Sing, pushing the dollar down against the Sing," said a dealer with a local bank.
The Indonesian rupiah, however, was soft against the dollar despite intervention by its central bank, dealers said.