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.