Currencies ravaged with rupiah diving lower

Currencies ravaged with rupiah diving lower

SINGAPORE (AFP): Southeast Asian currencies fell across the
board yesterday on concerns over the fate of companies saddled
with dollar-based loans as the Indonesian central bank reportedly
intervened to check the rupiah's dive to a historical low.

Dealers said fears in Indonesia that key companies would
default on their greenback-denominated loans spread to the
Philippines and Malaysia, pushing down their currencies and
stocks as well as those of Singapore.

The usually resilient Singapore dollar fell to a 40-month low
against the U.S. dollar amid local worries that the island
state's export competitiveness would be hit by the steep falls in
the currencies of its neighbors.

The rupiah fell to a historical low of 3,850 to the U.S.
dollar from Friday's close of 3,640 before ending Asian trading
at 3,710/25, dealers said, adding that the currency stabilized
after intervention by the central Bank Indonesia (BI).

It was the first time in months that a central bank was seen
to have stepped in after most of the central banks in the region
had their fingers burnt trying to salvage their currencies from
the marauding markets.

"With the rupiah having fallen more than 50 percent (since
July 1), BI probably wants to tell the market that enough is
enough," said Jimmy Koh, economist with London-based I.D.E.A.

Indonesia's State Secretary Moerdiono, after a meeting with
President Soeharto, did not confirm BI's intervention but told
reporters the government was obliged to intervene under
"extraordinary" circumstances.

The Malaysian ringgit fell on Monday to an intra-day low of
3.3880 against the greenback from 3.3620 on Friday before closing
at 3.3700 as Prime Minister Mahathir Mohamad ruled out
resignation even as he staked his political future on taking
Malaysia out of its financial crisis.

The Malaysian unit had crashed to a record low of 3.4080 last
week,

"Based on the negative reports we are receiving, it will not
be a surprise if the Malaysian and Indonesian currencies hit the
four levels (4,000 rupiah and 4.0000 ringgit per U.S. dollar)
soon," a dealer with a European house said.

News on Saturday that Malaysia chalked up its first trade
surplus in three months in August met with a muted response from
the market.

The Philippine peso ended at 34.926 to the U.S. dollar
yesterday from 34.910 on Friday amid rumors of more companies
defaulting on bank loans and inter-bank overnight borrowing rates
rose as much as 105 percent.

The peso's fall was limited due to a cap imposed by the
Bankers' Association of the Philippines.

The Thai baht, whose effective devaluation on July 2 triggered
regional currency turmoil, ended at 36.70 against the U.S. dollar
offshore from Friday's close of 35.55 as a forecast showed
government revenue falling short of an International Monetary
Fund (IMF) target.

Thailand must post a budget surplus in the year to September
30, 1998 to continue drawing on a US$17.2 billion IMF rescue loan
package.

Fears of banks in the region going bust have escalated as
businessmen who had tied their fortunes to the share market began
feeling the pinch of falling stocks used as collateral for loans,
dealers said.

Chia Woon Khien, head of Asian research at Swedish bank
Skandinaviska Enskilda Banken, said most central banks had hiked
interest rates to cushion their sliding currencies and high
foreign debt, but the increase had taken a toll on local
companies unable to service their loans and, in turn, their
commercial bank lenders.

The Singapore unit Monday ended at 1.5516 against the
greenback -- a level last seen in June 1994 - from Friday's close
of 1.5425 on fears that the city state's export competitiveness
would be hit, analysts said.

"I think the Singapore dollar will hit the 1.6000 level by the
end of the month because of competitive devaluation," said Tan
Kee Wee, economist with leading Singapore bank United Overseas
Bank.

Competitive devaluation is a process whereby markets or
governments move to adjust their currencies to maintain their
economic competitiveness.