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.