Indonesian rupiah surge lifts SE Asian currencies

Indonesian rupiah surge lifts SE Asian currencies

SINGAPORE (Reuter): The Indonesian rupiah's rebound on the back of sharply higher domestic interest rates gave a reprieve to Southeast Asian currencies yesterday, but dealers said the gains were likely to prove short lived.

The rupiah extended its rise after Bank Indonesia raised interest rates on Tuesday, which pulled the currency back from a fresh historic low of 3,045 to the dollar.

"We are seeing increased foreign capital inflows because of incredibly high rupiah yields," a U.S. bank dealer in Jakarta said. The rupiah firmed to around 2,770/75 at 0910 GMT against 2,850/60 five hours earlier.

But dealers said its rise would be blocked by dollar demand from Jakarta companies around the 2,720-2,750 region. Many of them were severely under-hedged after Bank Indonesia effectively floated the rupiah last week.

"The rupiah is the major mover at the moment and the other currencies are just being dragged along with it," said a U.S. bank dealer in Singapore.

The Singapore dollar received a further boost, firming through the 1.5080 resistance to the U.S. dollar, with the release of positive trade data for July.

The Trade Development Board said Singapore's non-oil domestic exports rose a nominal 6.9 percent year-on-year in July to Singapore $7.78 billion after rising 8.8 percent in June.

A Reuters poll of 14 economists had produced an average forecast of a 5.3 percent year-on-year rise in July.

The Singapore dollar was quoted at 1.5060/70 to the dollar at 0910 GMT against 1.5115/25 earlier in the day.

"I think 1.5100 will be a base for the U.S. dollar. I don't see it going much below that for the time being," said a dealer.

The Malaysian ringgit rose to 2.7765/95 to the dollar against 2.7808/38 earlier.

"For now, dollar/ringgit may be consolidating. But the pressure is still on the ringgit," a dealer at a Malaysian bank said. "Players will be looking to buy the dollar on dips."

The Thai baht firmed through the 32 to the dollar level in offshore markets and was quoted at 31.70/80 against 32.40/50 earlier. It strengthened to 32.35/45 in domestic markets.

But dealers said Thailand's outlook remained uncertain and there were growing expectations the central bank would lift capital controls imposed to stem speculative attacks on the baht in May.

"There are still a lot of problems in Thailand, both politically and economically. An appreciation of the baht won't do the economy any good," a Singapore dealer said.

The Hong Kong dollar was steady and overnight interbank rates eased as fears of an imminent speculative attack subsided in the face of repeated threats by Hong Kong officials.

But dealers said sentiment remained wary and most players saw the prospect of an attack on Asia's strongest currency peg as merely postponed.

The Philippine peso ended firmer on weaker dollar demand from importers and the central bank's move to tighten liquidity by closing its overnight lending facility.

The peso settled at 30.02 to the dollar against Tuesday's close at 30.14 after reaching an early high of 29.90.

The Taiwan dollar ended unchanged as the central bank continued to defend the T$28.727 level.