Japan-U.S. talks leave Asian money markets in suspense

Japan-U.S. talks leave Asian money markets in suspense

SINGAPORE (Dow Jones): Southeast Asian currencies were mixed
against the U.S. dollar in late trading on Thursday, as investors
await news to emerge from Japan Prime Minister Keizo Obuchi's
meetings today with U.S. President Bill Clinton.

Traders and economists expect the Tokyo meeting to touch on
the U.S. government's eagerness for Japan to get its economic
house in order - and sooner rather than later.

The discussion comes on the heels of an announcement late this
afternoon that the Liberal Democratic Party and the Liberal Party
have agreed to form a coalition government before the start of
the next regular session of parliament, as well as review the
contentious 5 percent consumption tax, which many were expecting
to be cut in the latest Japanese economic stimulus package,
announced last week.

In late trading, the U.S. dollar was in danger of slipping
below 120 yen, trading at 120.35 yen, down from 121.47 yen late
Wednesday.

The bilateral discussion in Tokyo is one of many to be
conducted this week so "watch out for comments from them, in
particular Clinton's visit to Japan and mention of trade
liberalization," said Thio Chin Loo, an economist at Banque
Paribas in Singapore, adding that Japan will most likely try to
convince the U.S. of its attempts to stimulate growth.

The other bilateral discussions being held this week include:
Canadian Prime Minister Jean Chretien in China, Korean President
Kim Dae Jung in Hong Kong and U.S. Secretary of State Madeleine
Albright in Indonesia.

Economists said the other key factor is - as always - the U.S.
market and this week's U.S. Federal Reserve decision to cut the
Fed funds and discount rates to 4.75 percent and 4.50 percent,
respectively, economists said.

If you work under the assumption that this is the last easing
in 1998, then the U.S. equity market could be looking
vulnerable," said Ryan Padgett, treasurer at Bank Brussels
Lambert in Singapore. "If the Dow (Jones Industrial Average) is
unable to stay above 9,000, then we could see it down sharply,
and that would be negative for the dollar, especially if it falls
below 120 yen, as people start building in more expectations of
another rate cut."

That would likely mean regional equity markets and domestic
currencies will continue to be insulated from volatile swings. If
anything, central banks and monetary authorities in the region
will have to be vigilant, economists said, in keeping domestic
currencies stable and competitive.

In late trading on Thursday, the U.S. dollar was trading at
36.2550 baht, unchanged from 36.2500 baht late Wednesday.

The U.S. dollar was also trading at 7,525 rupiah, up a touch
from 7,469 rupiah late Wednesday.

"The rupiah is performing surprisingly well given the civil
unrest this past week," said a trader at a Japanese bank in
Singapore, referring to last week's People's Consultative
Assembly meeting, which sparked off widespread student
demonstrations, leading to the death of more than a dozen people.

The U.S. dollar was trading at S$1.6315, down from S$1.6337
late Wednesday.

"The Singapore dollar continues to get support from the
government despite weak economic data," Padgett said.

On the Philippine Dealing System, the U.S. dollar was trading
at 39.73 pesos, down from 39.95 late Wednesday.

Meanwhile, in North Asia, the South Korean won continues its
climb unabated. The U.S. dollar was trading at 1,287.1 won, down
from 1,294.7 won on Wednesday.

The U.S. dollar was also trading at 32.438 New Taiwan Dollars,
down from NT$32.533 late Wednesday.