No end to turmoil for SE Asian money

No end to turmoil for SE Asian money

SINGAPORE (AFP): Speculators mounted a fresh attack against
Southeast Asian currencies yesterday, inspired by bad news out of
Thailand which took regional financial markets into a fourth week
of turmoil.

"Thailand has renewed its role as a catalyst for regional
currency instability," said Desmond Supple, head of Asian
currency research at Barclays (BZW) Global Foreign Exchange.

The Singapore dollar hit a 32-month low against the U.S.
dollar while the Malaysian ringgit touched its lowest point
against the greenback since the Thai baht's devaluation on July 2
set off the region-wide currency storm.

U.S.- based hedge funds and inter-bank players hammered
regional currencies and quickly locked in profits, careful not to
carry their positions into Friday when regional central bankers
meet in Shanghai, dealers said.

Malaysian Prime Minister Mahathir Mohamad's call for a "common
stance" to support Southeast Asian currencies and remarks that
laws could be formulated "regarding our currencies" made the
market pause momentarily, dealers said.

"The market eased up on that but the pressure just came back
again," said Alison Seng of MMS International.

"It appears that more concerted and concrete measures from the
central bankers are needed to stem the flood of currency
speculation."

Dealers said the Thai baht plunged to 32.16 to the greenback
in early Singapore trade from Wednesday's close of 31.30 amid
rumors that Bangkok will dismantle the two-tier exchange-rate
system it introduced to limit speculation.

It later recovered to end at 31.90 on the offshore market. The
baht had dipped below the 32 level Wednesday, more than 25
percent off its value prior to its float.

Analysts blamed the baht weakness, which spread to other
regional units late Wednesday, on the imminent release of a
report on the bad debts of Thai financial institutions and poor
half-year results of the banking sector.

A rumor gripped the offshore market that the Bank of Thailand
would at the weekend dismantle the two-tier market it imposed to
control non-residents' access to the baht and dry up baht
liquidity to prevent speculative attacks.

Such a move would be a trade-off for an International Monetary
Fund (IMF) loan, but analysts discounted any weekend
announcement.

"Thailand may not have a choice but to eventually seek IMF
help, but IMF help will come with strings attached," said
Jacqueline Ong of the British financial consultancy I.D.E.A.

An abolition of the controls would increase the supply of the
baht on the offshore market and open up a "lot of fresh upside
for the dollar-baht," Ong said, adding that the baht could then
dip to 34 or 35 to the greenback.

The Singapore dollar Thursday hit a low of 1.4782 to the U.S.
unit from 1. 4684 overseas as Finance Minister Richard Hu's
comment that its value would be set by market demand was taken to
mean authorities will not intervene.

The Singapore unit closed at 1.4768, the lowest since November
1994, dealers said. The ringgit was dragged down to 2.6545 from
2.6400 overnight, dealers said. It bounced back to 2.6350 but
closer lower at 2.6495.

The Indonesian rupiah fell to 2,615 from 2,585 overnight
before ending at 2,604 as Bank Indonesia Governor Soedradjad
Djiwandono called on banking and business leaders to remain
"vigilant" to ensure currency stability.

Supple of Barclays said there would be no respite in the
short-term, as regional central bankers gathered in Shanghai.

"Ultimately the contagion effect remains as strong as it was.
It is continuing across the board," he said, adding that "current
market conditions mitigate against a successful currency market
intervention."

He predicted the ringgit could test the 2.7000 level while the
rupiah looked set to converge with the weak end of the central
bank's intervention band of 2,682.

"So long as the baht sentiment is weak, it will be difficult
for other (regional) currencies to recover substantially," said
Daragh Maher of ING-Barings.

He said the baht should dip to a level where it had "fully
priced in the problems that Thailand will face" before the
regional turbulence ceases.

"The baht will eventually weaken to a level where these
worries are priced in. Speculative momentum will then dissipate
and the fundamentals will reassert themselves," he added.