Asian monies under pressure because of rupiah's slide

Asian monies under pressure because of rupiah's slide

SINGAPORE (Dow Jones): The Indonesian rupiah continued to
weaken Friday on a series of misstatements by senior
policymakers, putting pressure on currencies in other Asian
markets.

In late trading Friday, the U.S. dollar briefly surged past
the level of Rp 8,700, its highest point since Sept. 27, after
the governor of the central bank said he would intervene to
support the rupiah only "if it will be effective."

The statement by Sjahril Sabirin was widely interpreted as a
sign of weakness by traders already inclined to sell the currency
following a statement on Thursday by Indonesia's top economic
official, Kwik Kian Gie, who said he couldn't recommend his
country to foreign investors.

The rupiah closed in Jakarta at Rp 8,380 against the American
greenback after the central bank intervened the market before the
close of the trading.

The Thai baht and the Philippine peso were dragged lower by
the rupiah. Regional currencies had already been weakened by
expectations of an impending rise in interest rates in the U.S.,
where the Federal Open Market Committee is widely expected to
hike its key federal funds rate by 50 basis points when it meets
Tuesday.

The Singapore dollar, meanwhile, was higher in late trading
Friday following reports that the Monetary Authority of Singapore
had intervened to defend the currency on Thursday. The Thai baht,
while lower, also gained support from reports of central bank
intervention the previous day.

Around 0845 GMT, the U.S. dollar was at Rp 8,485, up from Rp
8,375 late Thursday but off its intraday peak.

Against the baht, the U.S. dollar was at 38.845 baht, up from
38.815 baht late Thursday.

The dollar also rose to 41.475 pesos from 41.430 pesos. The
peso continued to suffer from the Muslim insurgency in the
southern province of Mindanao, where rebels are holding foreign
hostages, said Philip Wee, treasury economist at Standard
Chartered Bank.

Among southeast Asian currencies, only the Singapore dollar
gained ground following Thursday's intervention by the Monetary
Authority of Singapore. The U.S. dollar fell to S$1.7243 from
Thursday's S$1.7265.

Traders hesitated to bid the U.S. dollar above the level of
S$1.7300 for fear of provoking a further round of intervention by
the MAS, analysts said.

"If selling intensifies to the levels we have seen, I'm sure
they will step back in," said Philip Wee, treasury economist at
Standard Chartered Bank.

But across southeast Asia, currencies are likely to weaken
further on expectations that U.S. rates will continue to rise
even after next week's Fed meeting. And a volatile U.S. stock
market is adding to the uncertainty, prompting investors to
withdraw funds from relatively risky emerging markets, analysts
said.

Analysts said the supply of U.S. dollars had all but dried up
in Indonesia, with exporters withholding the currency from the
market in the expectation that the rupiah will fall even further.

Patrick Bennett, currency strategist at Warburg Dillon Read,
said the market is waiting for a stronger stance from the
Indonesian central bank.

"They don't want to come in just to provide liquidity to the
market," Bennett said. "Nothing that's being said is dissuading
anyone from holding on to these dollars." The central bank, he
said, "Needs to come out and say something stronger."

Analysts said the rupiah would continue to weaken as the
market starts to wonder how long Kwik would stay in his job. Some
observers said the dollar could quickly jump to Rp 9,000 or
beyond.

"The markets will remain very cautious in Indonesia," said
David Simmonds, currency strategist at Citibank in Singapore.
"There clearly will continue to be talk and speculation about a
further cabinet reshuffle."

Indonesian President Abdurrahman Wahid, however, said he had
no plans to replace Kwik, calming the markets somewhat. He blamed
the weakening currency on the anniversary of 1998 ethnic riots,
saying local businesses were holding on to their U.S. dollars for
fear of unrest.

In South Korea, the U.S. dollar rose to 1,114.5 won in late
trading, up from 1,109.10 won on Wednesday. Thursday was a
holiday in Korea. Friday's closing level was the weakest for the
won since April 17, when it touched 1,115.30 won to the U.S.
dollar.

Analysts said, however, that the won was unusual among Asian
currencies in that it would gain against the dollar if
authorities tighten monetary policy in response to surging
economic growth.

The Taiwan dollar got a boost from a stock market rally. The
U.S. dollar ended trading at NT30.739, down from Thursday's close
at NT30.752. The central bank also supported the currency,
dealers said.