Regional bankers prepare to tackle currency crisis

Regional bankers prepare to tackle currency crisis

SHANGHAI (AFP): East Asian and Pacific central bankers began
arriving here yesterday on the eve of a key annual meeting as
Southeast Asian currencies faced further selling pressure.

Bank of Japan governor Yasuo Matsushita, Bank of Korea
governor Lee Kyung-Shik, Hong Kong Monetary Authority chief
executive Joseph Yam and Central Bank of the Philippines governor
Gabriel Singson were the first to arrive.

Malaysia's Bank Negara governor Ahmad Mohd. Don and Bank
Indonesia governor Soedradjad Djiwandono canceled their room
reservations, said sources at the Garden Hotel, where the one-day
meeting will take place.

It is not clear why Ahmad, who will be represented by his
deputy Fong Weng Phak, is not attending the meeting while
Soedradjad has remained in Jakarta to attend a meeting of the
National Private Banking Association.

Ian Macfarlane, governor of the Reserve Bank of Australia,
Bank of Thailand governor Rerngchai Marakanond, and Reserve Bank
of New Zealand Governor Don Brash are due later in the day.

Authorities in Singapore declined to name their delegation but
Monetary Authority of Singapore managing director Lee Ek Tiengand
was widely expected to attend.

As the central bankers made their way to Shanghai for the
scheduled meeting, expected to deal with the currency crisis set
off by the July 2 float of the Thai baht, speculators renewed
their attack.

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 may dismantle the two-tier exchange-rate system which
limits access to the baht to offshore players, dealers said.

The baht had dipped to a record low past the 32 level
Wednesday as Thai corporate players scrambled to buy the US
dollar on fears that the ailing currency could suffer further
losses amid poor finance sector results.

The Singapore dollar hit a 32-month low of 1.4782 to the US
unit from 1. 4684 overseas as Finance Minister Richard Hu's
comments that the currency's value would be set by market demand
were taken to mean that monetary authorities will not intervene.

The Malaysian ringgit was dragged down to 2.6545 to the
greenback from 2. 6400 and the Indonesian rupiah to 2,620 from
2,585.

Dealers said speculators, who kept a low profile earlier this
week returned to the market Tuesday to test the downside of
regional units.

Analysts said they believed the meeting would come out with a
strong statement against speculative attacks on regional
currencies but little action to back it.

Dargah Maher, economist at ING Barings, said: "My guess would
be it will be quite heavy on rhetoric and less on action."

With so many regional units under attack, most central banks
would be too busy guarding their own currencies to be able to
take part in a sustained joint intervention, they say.

Desmond Supple, head of Asian currency research at Barclays
(BZW) Global Foreign Exchange, said: "I expect very vociferous
verbal support (for regional currencies) but market conditions
mitigate against a successful currency market intervention."

Supple said all Southeast Asian economies burdened with
current-account deficits were vulnerable to currency weakness,
"particularly since regional central banks are attempting to
maintain control over interest rates which involves limiting
foreign exchange intervention."

A senior Citibank dealer in Asian currencies said: "The
meeting is unlikely to come out with any coordinated strategy. I
think regional central banks are not used to getting to work like
a G-7 kind of meeting. Each has its own set of problems. But you
may get a joint statement to calm the market. "

Alex Erskine, economist at Citibank NA in Singapore, said:
"The Shanghai central bankers' meeting has got to develop a
future strategy.

"I would hope that the conclusion would be a decision to move
towards truly floating exchange rates and for the interest rates
to be set at the right levels for each.

The central bankers' meeting, a Japanese initiative launched
in 1991, is the second such gathering.

Central bank participants are Australia, China, Hong Kong,
Indonesia, Japan, South Korea, Malaysia, New Zealand, the
Philippines, Singapore and Thailand.