Asian monies rebound on RI's decision to allow peacekeepers

Asian monies rebound on RI's decision to allow peacekeepers

HONG KONG (Dow Jones): Asian currencies rebounded strongly Monday following Indonesia's decision to allow foreign peacekeepers into East Timor.

The Indonesian rupiah, the Thai baht and the Philippine peso all strengthened rapidly at the start of local trading hours, as market participants responded to President B.J. Habibie's late- Sunday announcement by rushing to liquidate long U.S. dollar positions established ahead of the weekend.

In conditions of near-total illiquidity, rupiah purchases worth as little as $20 million were sufficient to drive the rupiah up by 8 percent from levels seen late Friday, said traders, as the U.S. currency was sold down to an intraday low of 7,700 rupiah.

The effect proved relatively short-lived, however, as heavy buying of dollars against the rupiah by a major U.S. bank in Singapore soon lifted the U.S. currency off its low.

Although the crisis in East Timor may have abated, the outlook for the rupiah remains bleak, as market participants focus once again on the scandal centered on the irregular transfer of $80 million from Bank Bali to a company closely associated with Habibie's Golkar party.

"The rupiah was sold off last week on fears that international aid to Indonesia would be halted because of the East Timor situation," said a regional-currency trader at a U.S. bank in Singapore.

"Pressure from that quarter has eased now, but there is still the Bank Bali case. Everybody knows how unhappy the International Monetary Fund is about that, so the market will not be so trigger-happy to buy up the rupiah again," he said.

Toward the end of Asian interbank trading, the U.S. currency was quoted at Rp 7,850. Although at that level the dollar was considerably above its earlier low, it remained well down from Rp 8,312 late Friday.

In the short term, heavy bidding interest should support the U.S. currency above Rp 7,800, said traders, although offers from market participants caught long dollars at higher levels should cap the market at Rp 8,000.

There was no impact on trading from the announcement by ratings agency Standard & Poor's Corp. that it was placing Indonesia on CreditWatch with negative implications because of the threat to international lending posed by the East Timor crisis. Dealers shrugged off the news, saying S&P was about two weeks behind the rest of the market.

Trading in the baht followed a similar pattern. After strengthening at the start of Asian trading, the Thai currency later gave back some of its initial gains in response to dollar purchases, mostly executed by U.S. banks in the offshore market.

Late in Asian trading, the U.S. dollar was quoted at 39.3200 baht, up from its earlier low of 39.2300 baht but below 39.4450 baht late in Asian dealing Friday.

The Philippine peso, too, weakened from its early high, but still ended local trading well up on the day.

After a rash of long liquidation propelled the dollar to an early low of 39.730 pesos, the U.S. currency clawed its way higher again during the remainder of the session.

At the close of trading the U.S. dollar was quoted at 39.860 pesos, up from a low of 39.730 pesos, but down from 39.943 pesos Friday.

Against the Singapore dollar, the U.S. currency ended Asian trading hours at S$1.6890, compared with S$1.6884 late Friday.

In other markets, the Korean won closed marginally higher against the U.S. dollar, its rise assisted by the yen's continued strength against the U.S. currency and a positive assessment of Korea's economic outlook from finance and economy minister Kang Bong-kyun.

At the Seoul close the U.S. dollar was at 1,191.80 won, down slightly from 1,192.20 won at the end of Friday's trading session.

In Taipei, the U.S. currency closed at NT$31.780 against the New Taiwan dollar, down from NT$31.800 on Friday.