Glimmers of hope drive SE Asian currencies up

Glimmers of hope drive SE Asian currencies up

SINGAPORE (Reuter): Southeast Asian currencies rebounded yesterday as traders saw rare glimmers of hope in Indonesia's bid for IMF assistance and Malaysia's looming budget.

Malaysia's ringgit, which has been creeping higher this week on expectations of a market-friendly budget, was the day's biggest gainer. It rose nearly four percent at one point to hit a high of about 3.0514 to the dollar against levels of about 3.1774/804 late on Wednesday.

"With (Malaysian Finance Minister) Anwar Ibrahim saying the budget will stop the rot, there's very little incentive to bet against it," said Jacqueline Ong, regional economist at I.D.E.A.

She said Kuala Lumpur players were expecting tax cuts in the new budget -- a prospect she saw as unlikely -- and offshore funds didn't want to be caught on the opposite side.

"I've got a feeling we've about hit the dollar bottom. It should be capped between 3.00 and 3.05 ringgit. But you never know: Given the thin volume, we could be looking at 2.9 tomorrow," she added.

Dealers brushed off Prime Minister Mahathir's Mohamad's statement that Malaysia was formulating a way to counter the ringgit's fall which would require the cooperation of all Malaysians.

"Mahathir's comments have pushed the ringgit down so far, so why should people buy it because of this," said one.

But some said the Mahathir's growing calls for further regulation of currency trading, which appeared to be attracting the IMF and World Bank, were making players more cautious.

Indonesia's decision on Wednesday to avoid a possible Thai- style crisis by seeking help from the International Monetary Fund (IMF) and other institutions to bolster its foreign reserves also lifted spirits.

The rupiah opened upbeat as traders took their cue from London and New York where the IMF news was greeted with cheers.

Persistent domestic dollar demand kept it stuck around the 3,550 per dollar level for most of the day, a near three percent rise from 3,650/60 late on Wednesday.

Finance Minister Mar'ie Muhammad said Indonesia was sounding out multilateral institutions, including the IMF, for help in boosting its foreign exchange reserves, but he did not specify how much assistance was being sought.

Analysts said this would give the Indonesian central bank access to desperately needed dollars to help domestic companies meet burgeoning foreign debt obligations following the rupiah's 33 percent drop against the dollar since early July.

"The rupiah's upside will be limited in the short term. There are no immediate measures on the IMF news. The question now is how many foreign creditors are going to roll over their maturing debts," said Ong at I.D.E.A.

Despite heavy sales of dollars for rupiah by offshore parties since Wednesday, dealers said the rupiah faced a stiff barrier at 3,500 to the dollar.

The Singapore dollar was propped up by the ringgit's rise, strengthening through the 1.5400 level to the U.S. dollar in afternoon trade against 1.5580/90 late on Wednesday.

"The market has been very long dollars against the Sing and some stop-loss orders were triggered at 1.5480 in dollar/Sing," a European bank dealer said.

"The 1.5550 level should be a top for now. I think this correction could go all the way to 1.50 and 2.98 (on dollar/ringgit)," she added.

The Thai baht dipped briefly on comments by Finance Minister Thanong Bidaya, but dealers said activity was fairly subdued as the market continued to look optimistically ahead to next week's finance sector reform package.

Thanong, in Japan to boost investor confidence in Thailand, told reporters the two-tier baht system could be lifted once market confidence returned. He also said economic growth would be "lower than two percent, but still positive," in 1997.

The baht was at 36.45/60 to the dollar onshore against 36.50/60 late on Wednesday. It was at 35.70/90 offshore.

The Philippine peso ended higher on central bank dollar sales at the 35.50 peso level, which caused the peso to breach the volatility band three times in its march upwards.

Trading was suspended after the third breach, an hour before the market's close. The peso ended sharply up at 34.129 against its previous 35.40.

Central bank governor Gabriel Singson said the bank had sold about $20 to $24 million by noon.