Most Asian currencies rise late, rupiah at 3-month high

Most Asian currencies rise late, rupiah at 3-month high

SINGAPORE (Dow Jones): Increasing signs that the Indonesian government will successfully weather its latest political storm helped push the rupiah to a three-month high Monday, and provided a lift to other Asian currencies.

President Abdurrahman Wahid last week took a major step toward diffusing political tensions by offering an apology for his performance to lawmakers who had called for his impeachment.

The beleaguered president continued his political balancing act this week by promising to delegate day-to-day management of government operations to Vice President Megawati Sukarnoputri.

The result in currency markets has been a sharp appreciation of the rupiah from above 9,500 per dollar a month ago to below 8,200 per dollar in intraday trading Monday.

Toward the end of trading the dollar had been bid up to reach Rp 8,230, but still was down from Rp 8,345 late Friday.

The last time the rupiah breached 8,200 per dollar was on May 11 when it hit 8,165.

"We are cautiously optimistic that the political process will improve from here on out," said Vincent Low, currency strategist at Merrill Lynch in Singapore. "And behind the politics there has been some real progress, albeit at a modest level, in bank recapitalization and selling of (distressed) assets."

Domestic players in the Indonesian market who sold the rupiah at levels between 9,000 and 9,500 per dollar were buying back into the currency Monday, a dealer at a U.S. bank said.

"I don't know how low they can push it, maybe 8,000 or 7,800," he said, noting that momentum turned in the rupiah's favor after it broke through a key 8,200 resistance level "with no trouble."

There is a wide divergence of views on where the rupiah is headed between now and the end of the year, with forecasts ranging from 8,000 to 10,000 per dollar.

The surging rupiah lent support to both the Thai baht and the Singapore dollar.

"We saw a flurry of dollar selling this morning. There were U.S. funds getting into the Asian currencies in some strong buying," the U.S. bank dealer said.

The baht shrugged off concerns over the country's political stability with the dollar falling as low as 40.440 baht in intraday trading. The dollar moved up to 40.595 baht in late trading, down from 40.805 baht late Friday.

The Singapore dollar continued to show resilience against its U.S. counterpart following an announcement by the Monetary Authority of Singapore last week that they were prepared to a let the local currency appreciate.

The U.S. dollar fell to S$1.7109 in the early minutes of trading, pushing it precariously close to the key support level of S$1.7100. But corporate U.S. dollar buying, and subsequent short-covering of U.S. dollar positions helped the currency recover.

Near the end of trading the U.S. dollar was quoted at S$1.7131, down from S$1.7143 late Friday.

The market is now "clean of U.S. dollar bulls" and the Singapore dollar is trading at its "fair value around the 1.7100 level," Merrill Lynch's Low said.

The Philippine peso finished the day higher despite the fact that fresh data showed the January-July budget deficit of 59.7 pesos billion far exceeded the government's target of 36.8 billion pesos.

A foreign bank trader said the news had little impact because the market has already factored in the larger-than-expected deficit.

The dollar closed at 44.885 pesos on the Philippine Dealing System, down from Friday's 44.895 pesos.

The New Taiwan dollar was flat in low volume trade, thanks to intervention from the central bank late in the session.

The U.S. dollar was unchanged at NT$31.085. Trading volume was at US$189 million, down from Friday's US$251 million.

Dealers said the central bank accounted for about half of the volume, selling U.S. dollars to boost the local unit.

The South Korean won ended weaker on U.S. dollar buying by local banks, traders said.

In thin trading ahead of Tuesday's Liberation Day market holiday, the dollar finished at 1,115.70 won, up from Friday's close at 1,115.40 won.

The U.S. currency fell in early trading on an early surge in the Seoul stock market following Hyundai Group's announcement Sunday of a revised restructuring plan.

But after the dollar found support at 1,114.10 won, local banks began buying dollars to cover short-dollar positions and to pay off interest on dollar-denominated loans, traders said.