Currencies fall in tandem with stock markets

Currencies fall in tandem with stock markets

SINGAPORE (AFP): Southeast Asian currencies tumbled yesterday
in tandem with stock markets, triggering fears of a fresh slide
as Thailand faced a new credit risk review and political
uncertainty gripped the Philippines.

After a short-lived regional rally, the Thai baht and
Philippine peso's woes spilled over to neighbors as players found
new excuses to take profits and buy up the U.S. dollar. Only the
Singapore stock market closed higher in the region.

"I think the currency rally was also on the back of the stock
market, but today the stock markets have corrected," said Maya
Pinto, regional economist with British-based financial house
I.D.E.A.

"Over the next few days I think the stock markets' performance
will be one of the factors determining the currencies as well,"
she added.

The Thai baht, whose de facto devaluation on July 2 had
triggered the regional currency turmoil, closed at 34.15 to the
dollar in offshore trade, down from Tuesday's close of 33.575.

This followed an announcement by credit rating agency Moody's
Investor Service that it had placed Thailand's long-term foreign
currency ceiling rating for bonds, notes and bank deposits on
review for possible downgrade.

The peso closed at 31.95, down from Tuesday's close of 31.30.
Rising tensions over President Fidel Ramos's ambiguous political
plans affected the market in the run-up to a church-backed rally
on September 21 against proposed constitutional amendments seen
as a ploy to extend his term.

Strong dollar demand from Philippine importers ahead of the
Christmas season and the apparent absence of the Central Bank
from the market were also at play.

The Malaysian ringgit closed at 2.9305, after finishing at
2.8865 on Tuesday.

The market was keenly awaiting Malaysian deputy premier and
finance minister Anwar Ibrahim's speech late Wednesday outlining
steps to rein in the country's current-account deficit, one of
the concerns behind the ringgit's weakness.

The Indonesian rupiah ended lower at 2,934 to the dollar from
the previous day's close of 2,896, while the Singapore dollar
closed at 1.5115 to the greenback from 1.5005 on Tuesday.
Analysts agreed the worst was far from over for regional
currencies.

"It's not gone down far enough to convince people that the
regional crisis has actually ended," said Sani Hamid, emerging
market analyst with U.S.-based research house Standard and Poor's
MMS.

"People are generally looking how much further upside there is
to the dollar in the next round of weakness," he added.

Regional currencies had ended last week's trading with their
first collective rise against the dollar since the crisis began.

They extended the recovery Monday as the peso bounced back
from an all-time low. On Tuesday, the rally continued as the
Malaysian ringgit staged a late comeback, with regional units
aided by the yen's rise against the greenback.

Alison Seng, another analyst with Standard and Poor's MMS,
said more volatility could occur toward the year's end.

"Hedge funds and different players in the market may not be in
a hurry to tidy up their books yet," she said. "Towards the end
of the year, maybe in November, they'll probably start squaring
off their positions."

Moody's said the Thai review could also affect the long-term
foreign currency debt and the bank deposit ratings of eight
banks, including the top commercial bank, Bangkok Bank plc, and
the Export-Import Bank of Thailand.

It said in a statement the review would "focus on Thailand's
prospective policy response to its present difficulties."
It would further explore "problems related to inadequate
transparency in a number of important sectors in the economy" as
well as problems faced by the financial sector," it said giving
no further details.

Moody's announcement came 10 days after another agency,
Standard and Poor's, announced it had cut the country's foreign
currency rating from "A" to "A-minus" in a sign of flagging
confidence in the Thai economy.