Pressure on baht begins to ease after its flotation
Pressure on baht begins to ease after its flotation
SINGAPORE (AFP): Pressure on the Thai baht eased two days after it was floated even as other Southeast Asian currencies came under pressure yesterday amid rumors of capital tightening in the region, dealers said.
The baht closed higher at around 28.90 against the U.S. dollar at the end of offshore Asian trading compared to Thursday's close of about 29.40 as foreign funds sold the greenback to beef up baht reserves, dealers said.
"The baht is pretty stable although it weakened slightly from its morning position but the focus was on other regional currencies," analyst Alison Seng of U.S. finance house MMS International said.
The Thai government on Wednesday floated the baht and dropped a 13-year-old policy of pegging it to a basket of currencies dominated by the U.S. dollar to breathe some life into an ailing economy.
Seng said that the market was divided on the outlook of the baht which shed nearly 20 percent of its value immediately after its floating or effective devaluation.
"On one side there is worry that dollar would shoot up further against the baht on continued attacks, on the other hand there remains a perception that some people will have to liquidate their long dollar positions to acquire baht liquidity," she said.
Dealers said the market was focused on the Malaysian ringgit, Philippine peso and the Indonesian rupiah amid persistent fears of a spillover effect from the baht slump.
The ringgit was volatile after reports that Malaysia's central Bank Negara wanted to meet with local bankers on Saturday, raising fears that capital controls would be imposed.
"Bank Negara seems to be checking the ringgit below the 2.5250 level (against the US dollar). Indeed today they actually started checking at the 2. 5235 level," a dealer with a European house said.
Bank Negara had told Malaysian bankers in separate meetings recently that it wanted faster disclosure of unusual currency trade developments, particularly large transactions with offshore parties, foreign exchange sources say.
But analysts said they do not expect Kuala Lumpur to impose radical steps to check excessive ringgit speculation.
"Bank Negara is likely to affirm their stance that if there are any huge transactions in the forward market, bankers will have to consult with the authorities, especially lending ringgit to overseas parties," Jimmy Koh, regional economist with British financial consultancy I.D.E.A. said.
"So, they will probably use just moral persuasion rather than formalizing any foreign exchange control, which may not be healthy for Malaysia which wants to introduce a series of financial instruments this year," Koh said.
The ringgit closed slightly higher at 2.5248 against the greenback at the end of Asian trading Friday after coming under pressure during European trading hours a day earlier. On Thursday, the ringgit closed at 2.5250
Dealers said the market was also awash with rumors that the Indonesian authorities wanted to widen the rupiah-US dollar intervention band amid reports that Jakarta's scheduled announcement of a deregulation package later Friday had been delayed.
The rupiah ended slightly higher at 2,430 to the US dollar from Thursday's close of 2,431.50.