BI intervenes to prop up rupiah amid calm market
BI intervenes to prop up rupiah amid calm market
SINGAPORE (AFP): Indonesia's central bank intervened yesterday to prop up the ailing rupiah amid an uneasy post-Christmas calm in Asian currency markets following the South Korean won's sharp rebound, dealers said.
Most troubled regional currencies ended slightly higher against the U.S. dollar as the won shot up on news of an emergency global cash infusion to salvage the South Korea economy.
The won rocketed to 1,400 against the U.S. dollar after flirting with the sensitive 2,000 level Wednesday.
Dealers said central Bank Indonesia stepped in to sell U.S. dollars in the afternoon and mopped up rupiah in an apparent bid to boost greenback supply thinning due to huge demand from local corporates, dealers said.
The intervention took place when the U.S. dollar was trading at 5,600 rupiah, a dealer at a U.S. investment house said.
The rupiah closed at 5,150/5,250 against the opening of 5,800/5,900.
"It could be one way of providing dollars to the market at a time when supply was drying up due to year-end pent up corporate demand," Sani Hamid, analyst with U.S. research house Standard and Poor's MMS in Singapore, said.
A dealer with a European bank said the intervention was effective in a thin market due to the year-end holidays. "You pay less to beef up the rupiah in a thin market, especially when the big boys are not around," he said.
The Indonesian rupiah on Wednesday had plunged an incredible 15 percent to a new historic low of 6,200 against the US dollar as local corporates scrambled to buy the greenback to repay mounting foreign debt.
Most Asian markets were closed Thursday for Christmas.
Analysts warned the worst of the regional exchange-rate turmoil was not over yet because of alarming debt levels in the region, and attributed yesterday's respite to year-end market lethargy.
Jimmy Koh, regional economist with British financial house IDEA, said the debt problem in Indonesia was getting worse and "the possibility of foreigners unlikely to roll over the debts is real."
"We do not rule out a possible recession in Indonesia next year," Koh said.
Apart from South Korea and Indonesia, Thailand is also saddled with debts, largely private debt of more that $70 billion.
The debt ratings of the three economies were cut Monday to "junk" status by U.S. credit assessor Moody's Investors Service.
The won received a boost on news at midnight on Christmas eve that the International Monetary Fund and key industrialized nations would accelerate disbursement of $10 billion from a bailout package by early January.
Seoul agreed to faster opening up of its capital markets in return for the global aid to meet the avalanche of maturing short-term debts that had threatened to swamp the country.
The won ended trading at 1,498.00 against the dollar after peaking at 1, 400.
"I think it is certainly premature to say they are out of the woods but at least the crisis mood will calm down a bit from the panic that prevailed beginning of the week which took the won just short of 2,000," said David Cohen, another analyst with MMS.
Cohen said that despite the IMF disbursement of funds, "there is still going to be a real threat of individual companies defaulting on some debts that will certainly be a lingering concern of the market."
Cash-starved South Korea is scrambling to convince foreign bankers to roll over its 100 billion dollar short-term debt in a bid to prevent a collapse of its financial system.
The Malaysian ringgit was slightly lower yesterday at 3.8750 against the U.S. dollar from 3.8650 on Wednesday while the Thai baht offshore rose to 45.50 from 46.00.
The Singapore dollar was at 1.6700 against the greenback from Wednesday's close of 1.6728 while the Taiwan dollar was little changed at 32.66 from 32. 63.