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.