Political jitters hit rupiah and peso in Asia
Political jitters hit rupiah and peso in Asia
SINGAPORE (Reuters): Asian currencies snoozed their way
through yesterday's session in the absence of the Tokyo market,
but the Indonesian rupiah and Philippine peso suffered due to
political jitters, dealers said.
Japan's Green Day holiday, the start of the so-called Golden
Week of holidays there, made for low volumes even in the major
plays like dollar/yen but there was some action, notably for
Jakarta and Manila.
"It certainly wasn't the busiest of days but we did see some
dollar demand in places, most notably the rupiah and the peso,"
said one trader at a major European bank in Singapore.
"It's always quiet during Golden Week and it has been quite
hectic so most people are happy to take a step back."
Worries about the escalation of anti-government student
protests and the next disbursement of IMF cash plagued the
rupiah. But dealers said the extremely tight monetary stance of
the Indonesian government -- overnight money was changing hands
above 45 percent on Wednesday -- would slow its decline.
The rupiah slipped again after rating agency Standard & Poor's
Corp. said it was concerned about the pace of banking sector
reform in Indonesia.
The beleaguered currency finished around the 8,130 per dollar
level after closing on Tuesday around 8,000.
The Philippine peso fell above the key 40 per dollar level
from around 39.70 on Tuesday, remaining weak due to anxiety about
the May 11 presidential election.
The peso shrugged aside central bank interest rate rises, and
overseas players were likely to be bidding for dollars right up
to election day.
The Thai baht held on to its gains at around 38.58 per dollar
and dealers said a test of the 38 might be on the cards amid some
cross buying of the baht against the ringgit and Singapore
dollar.
Dealers cited news Singapore Airlines had expressed interest
in buying a stake in Thai Airways as a possible factor behind the
baht/Sing dollar buying.
The Thai cabinet approved in principle government plans to
issue up to $5.0 billion of bonds in the foreign market in an
effort to alleviate the domestic liquidity crunch.
Liquidity has dried up as the Financial Institutions
Development Fund (FIDF), which was set up to bail out Thailand's
troubled financial institutions, borrowed heavily in the short-
term note market.
But some dealers were beginning to see signs of strain in the
baht's recent bullish performance and said the squeeze had
created a lot of air under the currency.
"The Bank of Thailand has been issuing a lot of paper and the
baht is artificially strong. I don't know how long the funds will
stay in the country," a European bank dealer in Singapore said.
The Indian rupee weakened in the forward dollar market after
the Reserve Bank cut its key bank rate to 9 percent from 10
percent, as part of its credit and monetary policy for the first
half of fiscal 1998/99.
The Australian dollar rallied from three-and-a-half month lows
of around $0.6430, following news of inflation data, which
economists said did not increase the chances of an interest rate
cut.
The Malaysian ringgit benefited from offshore interest, but
dealers said the 3.75 level was proving to be a barrier to
further rises.
The South Korean won remained firm after news of a current
account surplus was countered by a 10.1 percent year-on-year drop
in industrial output for March.
The current account surplus of $3.70 billion in March compared
with a $1.81 billion deficit the year before, but analysts noted
that imports in March slumped 36.3 percent while exports rose
just 3.3 percent.