Currencies firm, though wary of rupiah

Currencies firm, though wary of rupiah

SINGAPORE (Reuters): Asian currencies regained their footing in slow trade yesterday, helped by the U.S. dollar's fall against the yen and relative stability in regional stock markets.

But dealers and analysts expected only a brief reprieve, as worries about Indonesia and the future of its accord with the International Monetary Fund continued to dog the market.

The re-election of President Soeharto for a seventh five-year term came as no surprise, leaving the rupiah wedged in a narrow 500-points range against the dollar as traders awaited details of cabinet appointments, expected after Wednesday's swearing-in ceremonies.

"Let's see how it goes with the IMF after Soeharto's election. If the turmoil in Indonesia is not contained, every currency in the region will suffer," a senior European bank dealer in Bangkok said.

Concern that Jakarta would soon announce a currency board system to stabilize its rupiah weighed on the market and although the feasibility of the plan remained in doubt, most dealers were reluctant to commit themselves.

"It looks like their main priority is to stabilize the currency. They don't seem to care about anything else. But if they rush it through before the end of the month, it could anger the IMF," said the head of regional currencies at a European bank in Singapore.

IMF Managing Director Michel Camdessus expressed frustration overnight with what he called the "diversion" of the currency board debate and said a crisis in Indonesia could undermine efforts to combat financial turmoil in Asia.

The World Bank added to the refrain of bearish comments about Indonesia, saying it was pessimistic about the economy at present but hoped the formation of a new government could help in solving the crisis.

"Financial crises do concentrate the mind and President Soeharto is one of the great political survivors. With a fresh mandate and a new government there is at least a possibility for re-engagement on these issues," said Mark Brown, the bank's vice- president for external affairs.

Indonesia said it would send a top-level economic delegation to Washington next week for talks with the United States and the IMF.

Elsewhere, the Malaysian ringgit extended its early gains, reaching a high of 3.86 to the dollar, on stop-loss dollar sales and comments by Finance Minister Anwar Ibrahim.

Dealers said Anwar's statements that the government may revise its economic projections for 1998 and allow financially insecure banks to close down reflected welcome realism in the current climate.

The Singapore dollar tracked its neighbor's rise, but dealers said it would face resistance at the 1.6350 level to the U.S. dollar.

The Thai baht gained from offshore dollar sales, but domestic corporate demand for dollars below the 44.00 baht level thwarted its rise.

Prime Minister Chuan Leekpai said he was more concerned about the economic situation in Malaysia than in Indonesia because Thailand would be more affected by problems in Malaysia.

The Philippine peso firmed above 40.00 to the dollar alongside its Southeast Asian counterparts, its rise aided by a lack of corporate dollar demand.

The central bank raised its one-month lending rate to 18.184 percent from 17.93 percent last week after T-bills rates rose in response to higher February inflation and jitters over the IMF- Indonesia row.

In north Asia, the Taiwan dollar was lifted by strong selling of the U.S. dollar through non-deliverable forward trading as the dollar weakened against the yen.

Taiwan Premier Vincent Siew ordered the finance ministry to take measures to boost exports, especially to Asian countries, after weekend news that Taiwan had posted a rare trade deficit for February.

The South Korean won firmed on stop-loss dollar sales amid less than expected importer demand for dollars and some exporter negotiations.

Seoul traders said the central bank was also supplying dollars following the recent expire of a six-month forward contract to sell dollars.

They said the Bank of Korea needed to settle slightly more than $600 million in forward trading this month.

The Hong Kong dollar was firm while forwards extended their early falls as players squared long positions on a perception the Hong Kong Monetary Authority was determined to keep rates soft.