Currencies defensive despite IMF cheer

Currencies defensive despite IMF cheer

SINGAPORE (Reuters): Asian currencies firmed late yesterday
but were crouched in defensive positions, reacting only mutely to
a slew of positive comments from U.S. and IMF officials on the
progress of financial reform in Asia.

The Indonesian rupiah and Malaysian ringgit blipped up a
fraction, but the underlying tone was fragile, dealers said.

"We're into a correction phase ... the domestic accounts are
still buying (dollars) and international players have not
returned," said a manager with a U.S. institution.

He said credit problems ahead were dampening enthusiasm and
people were preparing for a re-rating of equity markets.

Spot rupiah finished in late trade at 8,250/8,350, up from a
low of 9,000 and from an opening of 8,700/8,900.

Dealers said demand for dollars checked the rupiah's rebound
as optimism over Indonesia's fresh commitment to IMF-sponsored
economic reforms burned less brightly than Thursday.

Investors were heartened by Jakarta's agreement to tighten
IMF-led measures, but expressed varying confidence how these
would be carried out and monitored.

"The weakness of the rupiah suggests the market is skeptical
about the actual implementation progress," said Andy Tan, general
manager of Standard & Poors/MMS.

President Soeharto said on Thursday Indonesia would cut
subsidies on fuel, end tax breaks for the national car program
and dismantle monopolies in basic commodities.

But the market was concerned that estimates of zero economic
growth, from a previously announced four percent, and 20 percent
inflation for the 1998/99 fiscal year would eat into profits.

The Malaysian ringgit recovered from its early low against the
U.S. dollar and was moderately buoyed by IMF chief Michel
Camdessus' remarks that Malaysia was not facing a crisis.

Camdessus, on a tour of the region, said Malaysia had taken
important steps, especially in the area of fiscal policy, and did
not need an IMF rescue package.

The ringgit crept up to 4.2200/4.2300 versus 4.2700/00
earlier, and against late Thursday's 4.3000/4000.

In Singapore, the Sing dollar bounced off its low of 1.7700
per dollar to stand at 1.7355/1.7385 up from 1.7525/1.7595.

Dealers said the perk in the ringgit was a factor, helped by
the likelihood of firmer interest rates in the region.

A major bank in Singapore announced a third hike in prime
rates, another 50 basis points to 7.5 percent, within two months.

The Thai baht firmed late on exporter dollar sales and the IMF
chief's pledge to be flexible in a review of Thailand's $17.2
billion rescue package, dealers said.

The baht onshore edged up to 52.80/53.10 per dollar at 1000
GMT against 53.45/53.55 earlier and 52.90/53.15 late Thursday.

Offshore, the Thai unit was traded at 51.40/51.70 per dollar
versus 51.80/52.50 earlier.

The Philippine peso inched up to 41.350/450 per dollar against
Thursday's 41.55 on foreign fund inflows and after the central
bank resumed its intervention, traders said.

The bank was seen offering dollars at 41.40 by midsession
after commercial demand heightened from a steadily rising peso.

In North Asia, currencies held steady, underpinned by more
confidence in South Korea from investment funds.

The South Korean won ended at 1,618 to the dollar, a notch
lower than its opening at 1,610. It previously closed at 1,605.

Dealers said this was a result of a correction after rising to
1,585 in early morning trade and that the won's rise was also
being checked partly by caution that conditions for a sustained
rise were not yet clear.

U.S. Deputy Treasury Secretary Lawrence Summers, in South
Korea on Friday on the last leg of his Asian tour, said he was
encouraged by steps being taking to implement reforms there.

Taiwan's dollar firmed, helped by the won and Japanese yen,
rising to T$33.792 against Thursday's T$33.980 close.

It had risen for four consecutive sessions since sinking to a
10-year closing low of T$34.481 on Monday.

Hong Kong's dollar also edged up on heavy dollar sales.
It closed at HK$7.7370/90 per dollar, up from 7.7390/10 at the
open and against Thursday's close at 7.7400/7.7420.

Rises were aided by the firmer stock market as fears eased of
an increase in debt financing problems.