Indonesia's election optimism boosts rupiah, other units rise
Indonesia's election optimism boosts rupiah, other units rise
HONG KONG (Dow Jones): Growing optimism over the progress of
Indonesia's parliamentary elections, and a robust rally in the
yen helped lift Asian currencies against the U.S. dollar Monday.
Local currencies across the continent ended the day higher,
bought up in response to improving economic fundamentals and a
robust rebound in the yen.
But it was the Indonesian rupiah that stole the show,
strengthening in the offshore market as voters went peacefully to
the polls in the country's first parliamentary elections since
the fall of president Soeharto over a year ago.
Dealing rooms in Jakarta were closed for the day, but
purchases of the rupiah in the Singapore market lifted the
Indonesian currency to its highest level since the middle of May
as sales pushed the U.S. dollar below the psychologically
important Rp 8,000 mark.
"A lot of players were long dollars before the elections, but
there was no violence, so now we are seeing some (dollar) selling
from U.S. funds," the rupiah trader at a U.S. bank in Singapore
said.
"I think today's high of around Rp 8,000 should form a top for
now, and I wouldn't rule out seeing Rp 7,000 or even Rp 6,500,"
the U.S. bank dealer said.
That target may prove over-optimistic, according to traders at
other banks in Singapore. But with dollar-buying pressure from
onshore banks thought likely to abate following the poll, one
said: "I wouldn't be surprised to see the dollar drift lower, to
around Rp 7,500."
Late in Asia, the U.S. dollar was quoted at Rp 7,765, nearly 4
percent below levels of Rp 8,065 seen toward the end of Friday's
session.
Any rapid selloff of the dollar against the rupiah following
the election could also see the U.S. currency fall against the
Singapore dollar, traders said, although they warned the drop
would be modest.
According to the head of foreign-exchange trading at a
Singapore bank, a fall in the U.S. dollar to Rp 7,000 or below
could also see the U.S. currency slide to S$1.7220.
"But I don't see it going below that level in the short term,"
he said, predicting that solid support should emerge above
S$1.7200.
With dealers' attention fixed firmly on developments in
Jakarta, trading activity in the Singapore dollar was extremely
subdued Monday. The U.S. dollar's fall against the yen barely
caused a stir, as the market drifted aimlessly sideways.
Late in Asia, the U.S. currency was quoted at S$1.7272, up a
touch from S$1.7265 toward the end of local trading hours Friday.
Trading in the Thai baht was similarly quiet Monday, with
dealers unable to point to any factors likely to push the Thai
currency out of its well-worn range of 37.05 baht to 37.15 baht
to the U.S. dollar.
Toward the end of local dealing, the U.S. currency was quoted
at 37.0750 baht, unchanged from Friday's close.
The Philippine peso fared better, as the local foreign-
exchange market reacted positively to Friday's data showing that
the year-on-year inflation rate continues to decline.
At the close of local trading, the U.S. dollar had slipped to
37.980 pesos, from 38.028 pesos at the previous close.
In North Asia, the New Taiwan dollar rose strongly, hitting
its highest level in three-and-a-half months after Chou A-Ting,
director of foreign exchange for the Central Bank of China -
Taiwan's central bank - said the local dollar has room to rise in
the near term.
"Fundamentally, Taiwan's economy is good, so the NT dollar
should appreciate," Chou said late Saturday on the sidelines of
the annual meeting of the Bank for International Settlements in
Basel.
The local currency was further bolstered by domestic equity
market strength and the news that Taiwan's foreign-exchange
reserves reached a four-year high of $95.70 billion in May, up 13
percent from a year ago.
At the close of local trading, the U.S. dollar was quoted at
NT$32.629, down from NT$32.742 at the previous close.
The South Korean won also edged higher, although dollar-buying
by the Export-Import Bank of Korea limited the local currency's
gains.
At the close, the U.S. dollar was at 1,183.20 won, down from
1,183.80 won Friday.