Dollar's fall sparks new fears in Southeast Asia
Dollar's fall sparks new fears in Southeast Asia
SINGAPORE (AFP): Most currencies of Southeast Asia's booming
economies continued to climb against the U.S. dollar yesterday as
analysts warned the greenback's losses could hurt the region's
dependence on exports for growth.
"Expectations of using exports as the main driver of growth
will need some rethinking by these economies which could be
messed up by the U.S. dollar's fall," said Phoon Kok Fui, the
Southeast Asian equities research head of Japan's Yamaichi
Merchant Bank.
Poon said persistent U.S. dollar weakness would not only make
exports from Southeast Asia to the United States more expensive
but also slow down economic recovery in Japan linked so closely
to the region.
The region's exports have mainly been driven by investments
from Japan, the economy of which would also be hit by more
expensive exports to the United States due to the surging yen,
other analysts said.
"Already the equity markets in the export-driven region are
concerned by the steep appreciation of the yen against the U.S.
dollar and if this problem persists, regional economic growth and
corporate earnings could also slow down," Poon told AFP.
The United States is Southeast Asia's main market. Most of the
countries in the region manage their currencies against the U.S.
dollar.
This, analysts say, directly gears external accounts to U.S.
dollar movements and indirectly but importantly affects their
attractiveness to foreign investors, inflation outlooks and
ultimately government policy.
The greenback dipped below 86 yen for the first time in Tokyo
yesterday to touch 85.75 yen at one point in early trading
shortly after slumping to a record low of 85.55 yen in Sydney.
Troublesome
Japanese Prime Minister Tomiichi Murayama called the dollar's
plunge "troublesome."
In foreign exchange trading in Singapore, Southeast Asian
currencies appreciated against the U.S. dollar as more
institutions dumped the greenback, dealers said.
As at 07:30 GMT, the U.S. dollar was quoted at 2.5210
Malaysian ringgit (as compared to 2.5255 on Monday), 24.60 Thai
baht (24.63), S$1.4063 (S$1.4085) and Rp 2,230 (Rp 2,234),
dealers said.
"What we are made to understand is that the Indonesian central
bank is checking the market. We are not sure whether there is any
intervention by central banks in the region," a dealer with a
foreign bank said.
Despite market concern that the surging yen could hurt
Indonesia whose loans are largely yen-denominated, economists in
Jakarta said Indonesia would be able to manage the problem.
"Our yen debts are long term in nature but the fluctuation in
exchange rates, especially the yen against the dollar, is
resulting in quite a heavy but still bearable, burden," economist
Pande Raja Silalahi said.
Thailand yesterday fixed the official mid-rate at an 11-year
low of 24.60 baht to a dollar, the lowest since the Thai currency
was devalued in November 1984, from 23 baht per dollar to 27
baht.
"Those paying off loans in the yen or the (German) mark will
definitely suffer since the yen has appreciated against the baht
by 13 percent, while the baht has strengthened against the dollar
by about two percent since the beginning of this year," said
Pisal Manoleehakul, managing director of Thai Farmers Research
Company.
He said that both public and private sector debts were 70
percent committed in dollars, 20 percent in yen, and two to three
percent in the mark.
The Malaysian ringgit depreciated 13.4 percent against the yen
in 1993 and slipped further by 5.8 percent in 1984 due mainly to
the marked strengthening of the yen against the U.S. dollar and
other major currencies, officials in Kuala Lumpur said.
The Malaysian government's external debt of 57.1 billion
ringgit (US$22.84 billion) is largely denominated in U.S.
dollars, with less than a third in yen.