Asian monies down late amid twists in rupiah's fortunes

Asian monies down late amid twists in rupiah's fortunes

SINGAPORE (Dow Jones): Asian currencies slumped late Thursday,
as Northeast Asian currencies fell on domestic concerns while
Southeast Asia's reacted to the dramatic twists in the Indonesian
rupiah's fortunes.

An explosion which rocked the office of a prominent Indonesian
human rights group late Wednesday, just hours before the
corruption trial of ex-dictator Soeharto was set to resume,
pushed the dollar up to around Rp 8,860 early Thursday. Late
Wednesday, the dollar was at Rp 8,835.

But the dollar retreated to below Rp 8,800 on news the
government had won unanimous approval Thursday from the London
Club of commercial creditors to roll over $340 million in
sovereign debt, which would herald a credit ratings upgrade.

A few hours after the announcement, ratings agency Standard &
Poor's said it will upgrade Indonesia's sovereign rating "very
soon," lifting optimism toward the rupiah. S&P said it will
likely upgrade Indonesia's sovereign rating in the range triple-C
to single-B, from the current selective default grade.

Although the possible ratings upgrade didn't come as a
surprise, the market badly needed a vote of confidence as market
participants awaited the outcome of Soeharto's scheduled trial.
But the euphoria toward the rupiah proved to be short-lived.

The decision by the presiding judge in Soeharto's corruption
trial to drop the case Thursday, after a team of independent
doctors said the former dictator was too ill to stand trial,
knocked the wind out of the rupiah's sails.

"Everything, from the London Club agreement to the imminent
S&P upgrade, has been pushed aside," a dealer at a U.S. bank
said. "This is the event of the day."

The dollar rebounded back above the Rp 8,800 level and was
trading at Rp 8,845 around 0840 GMT.

"It does reduce the likelihood of further disruption in the
city, but it will be negative in the sense that Soeharto has
gotten away from his alleged years of misrule and corruption,"
said Steve Brice, treasury economist at Standard Chartered Bank.

Every stage of Soeharto's trial had been preceded by
demonstrations, and unexplained bombings, a recent one being the
blast at the Jakarta Stock Exchange building that left 15 dead.
The government has said it believes pro-Soeharto elements are
behind these bombings.

Other Southeast Asian currencies mimicked the rupiah's moves,
as the reprieve in Asian foreign exchange markets earlier this
week ran its course, dealers said. The halt in skyrocketing oil
prices and fears of further euro-supportive intervention had
provided some relief for Asian currencies earlier this week.

On the Philippine Dealing System, the dollar closed at 46.27
pesos, up from 46.195 pesos Wednesday.

Against the Singapore dollar, the U.S. currency advanced to
S$1.7450 from S$1.7406 late Wednesday.

The Thai currency resumed its recent downtrend, after the
dollar failed to stay below 42 baht Wednesday, dealers said.

"The baht had rallied quite a lot in the last few days and the
market was short of dollars," said Mansoor Mohi-uddin, a regional
currency strategist at UBS Warburg.

Thai central bank Governor Chatu Mongol Sonakul's remarks
Wednesday that the bank wouldn't be swayed by political pressure
from the government to buoy the baht ahead of a national election
later this year also contributed to the currency's slide, dealers
said.

Similarly, the three-day rally in the South Korean currency
fizzled out Thursday, as dollar short-covering by local banks
pushed the won lower, dealers said.

The dollar finished at 1,115.80 won, up from Wednesday's close
of 1,113.40 won. Traditional month-end dollar-selling by local
exporters stymied the dollar's rise, capping it below 1,116 won,
dealers said.

The New Taiwan dollar closed at its weakest level in nine-
months, as the local bourse skidded 2.3 percent to a new 18-month
low and on end-of-quarter demand for the U.S. currency.

The U.S. dollar closed at NT$31.318, up from NT$31.291
Wednesday.

Friday, Asian currencies will likely be influenced by the
dollar's reaction to the euro on the outcome of Denmark's vote
Thursday on whether to replace the national currency, the krone,
with the euro.

A vote against the euro could deal a fresh blow to the common
currency, although this could be tempered by expectations of a
possible intervention by the G-7, while a positive outcome could
propel the euro.

"If tomorrow we come back to see the euro say, at $0.89, it
will give Asian currencies a lift temporarily," said Brice at
Standard Chartered Bank. Late Thursday, the euro was at $0.8849.