Intervention calms Asia's markets
Intervention calms Asia's markets
HONG KONG (AFP): Central banks in Southeast Asia's booming economies acted swiftly yesterday to calm their financial markets after being dragged into the fall-out of the Mexican peso meltdown.
In Hong Kong and Jakarta, central banks succeeded in warding off speculators who might have considered the region's emerging markets as vulnerable as those in Latin America.
"It looks like the central banks have completed their task -- that is, to calm down the markets," said Eddie Tan, Citibank's vice president and foreign exchange manager in Singapore.
"Now they may want to let fundamentals rule the market again," he said.
Hong Kong's quasi-central bank, the Monetary Authority, acted for the third time in as many weekdays to prop up the colony's dollar by withdrawing a further HK$2.94 billion (US$379 million) from the banking system.
"The move was necessary," a spokesman said, citing the threat of further speculation on a currency already left sagging by a big sell-off by foreign fund managers of Hong Kong stocks.
The intervention helped the Hong Kong dollar to stabilize at 7.747-7.748 per U.S. dollar, compared to its 18-month low last week of 7.763-7.765 after the sudden 15 percent depreciation of the Mexican peso.
The overnight rate charged on inter-bank loans meanwhile eased to five to six percent, compared with 12 percent on Friday.
Jakarta
In Jakarta, the Indonesian central bank raised its key one- month discount rate to 15.75 percent, up half a percentage point, to encourage investors to sell U.S. dollars and buy rupiah.
The tactic appeared to work, with the rupiah trading in the 2,211-2,213 range for most of the day after opening weaker at 2,218. Three- and six-month swap contracts traded within a tight range.
"I think they effectively intervened in the market," said Credit Lyonnais Indonesia treasury manager Charley Seliang.
Yesterday's interest rate rise followed two interventions by the central bank on Friday, officially said to have involved US$140 million. Other estimates have put the action at more than $700 million.
Bangkok's currency markets returned to normal after Friday's 400 million U.S. dollar intervention by the Bank of Thailand, with the baht changing hands at 25.08 per U.S. dollar -- compared with Thursday's 26.20.
In Singapore, Citibank's Tan said the peso crisis had clearly shown the enormous muscle of Southeast Asian central banks, flush as they are with reserves which reflect the region's economic health.
"Armed with excess reserves, the central banks have showed how quickly they could restore calm," Tan said.
Closing rates in Singapore, a major center for dealing in Southeast Asian currencies, saw the Malaysian ringgit at 2.5540, the Singapore dollar at 1.4510, and the Thai baht at 25.08 per greenback.
"The Indonesian rupiah is the weakest and most vulnerable of the regional currencies," a senior dealer with Banque Nationale de Paris said. "So it may take some time for it to recover."
"The rule of thumb is to always be cautious after central bank interventions," the dealer added. "So the short term outlook is still one of caution."
In Manila, the Philippine peso stabilized against the U.S. dollar yesterday on heavy Central Bank intervention after it taking a beating last Friday, officials said.
The Philippine Dealing System (PDS) said the average rate was 24.67 pesos to a dollar, compared to 24.716 on Friday.
Currency traders said the Central Bank unloaded five million pesos to account for 41.66 percent of the 12 million pesos ($486,000) changing hands.