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.