Firmer rupiah drives Asian currencies high

Firmer rupiah drives Asian currencies high

SINGAPORE (Dow Jones): Asian currencies were firmer late on Thursday, basking in the Indonesian rupiah's ascent to a six-week high.

Snapping out of its recent consolidation against the rupiah, the dollar skidded through one support level after another late Thursday, helping extend the recent recovery of the other Southeast Asian currencies.

"The market got ahead of itself," said Mansoor Mohi-Uddin, foreign exchange strategist at UBS Warburg. "They've become too overbearish on these currencies."

In North Asia, the South Korean won and the New Taiwan dollar also rose on domestic factors.

The Indonesian currency grabbed the limelight as market participants bailed out of their long dollar positions on speculation government officials would pressure Indonesian exporters at a meeting later Thursday to repatriate dollars, in the government's bid to boost the rupiah.

The market wasn't convinced by the central bank's denial that this would be on their agenda at their meeting with large Indonesian exporters at 0900 GMT. Market observers said the government will probably rely on "moral suasion", rather than force.

Also boosting sentiment toward the rupiah was a growing realization that the political risks in Indonesia had been overstated, following official assurances that President Abdurrahman Wahid won't be impeached during the critical session of Indonesia's top legislature which begins next week.

Around 0755 GMT, the dollar was at Rp 8,675, down 2.6 percent from Rp 8,908 late Wednesday. After breaching the psychological support levels of Rp 8,800 and Rp 8,700 late in the day, the dollar fell to as low as Rp 8,610, its weakest level since June 21.

"Offshore speculative players seem to have been squaring loss- making long (dollar) positions," said Bank of America in a report, adding that some participants were adding short dollar positions.

While the dollar will find technical support around Rp 8,450, it will likely remain buoyed around Rp 8,550 to Rp 8,600 in the short term, said Mohi-Uddin at UBS Warburg.

Against the Thai baht, the dollar also broke below a critical support level of 40.800 baht as offshore participants continued to unwind their long dollar positions, dealers said.

"It's possibly cut-loss selling," a dealer at U.S. bank said.

The dollar was at 40.725 baht, down from 40.925 baht late Wednesday.

UBS Warburg's Mohi-uddin said the "much, much bigger" support level of 40.480 baht "should hold".

In the Singapore dollar market, the U.S. currency was at S$1.7274, down from S$1.7285 late Wednesday. The U.S. dollar had fallen to as low as S$1.7255 in early trading, but rebounded partly on bids by local banks, dealers said.

"Some smart guys in the market reckon the Singapore dollar rally is overdone, a mood supported by news that local banks (were) bidding on the bottom-side of the (U.S. dollar)," Bank of America said. "However, our initial feeling is that the recent shift has been appropriate and the Singapore dollar is roughly in the center of a new trading range."

The Singapore dollar has rebounded sharply since the Monetary Authority of Singapore commented a week ago that it was prepared to allow a modest and gradual appreciation of the Singapore dollar to ward off imported inflationary pressures.

In Manila, the dollar was at 44.685 pesos, down from Wednesday's close of 44.810 pesos.

Dollar-selling by foreign investors in the local stock market shored up the South Korean won, which didn't react to the central bank's expected decision to leave its one-day call rate unchanged in August around 5 percent, dealers said.

The dollar finished at 1,114.80 won, down from Wednesday's close of 1,115.70 won.

The New Taiwan dollar, which is expected to remain pressured by the sluggish local stock market in the short term, found some respite when the central bank intervened in the market, dealers said.

The U.S. currency slipped to NT$31.078 from Wednesday's close of NT31.086.

While regional currencies will likely consolidate in the next few trading days, the bias for a stronger dollar remains, since the U.S. Federal Reserve may raise interest rates as early as Aug. 22, when it next holds its policy meeting, analysts said.