Regional currencies come under renewed pressure
Regional currencies come under renewed pressure
SINGAPORE (AFP): Southeast Asian currencies have come under renewed pressure after Malaysia and the Philippines received credit-outlook downgrades and a proposed regional bailout fund failed to take off.
Last week's annual meetings of the International Monetary Fund (IMF) and the World Bank in Hong Kong gave a mixed reception to a still hazy plan to set up a multi-billion-dollar war chest to defend economies from financial raiders.
Markets are meanwhile awaiting developments in Thailand after its parliament backed a new anti-corruption constitution and kept Premier Chavalit Yongchaiyudh's shaky coalition in power by voting down a censure motion.
U.S.-based credit rating agency Standard and Poor's on Thursday cited fears of a decline in Malaysian bank asset quality when it downgraded the country's long-term foreign currency credit outlook from "stable" to "negative."
The revision sent the Malaysian ringgit crashing to a new record low of 3.1450 to the dollar, although it recovered to close at 3.1220 on Friday, when the ratings agency turned its sights on the Philippines.
Standard and Poor's lowered Manila's long-term foreign and local currency rating outlook from "positive" to "stable," reflecting the fall of the peso and the country's economic woes. The peso closed marginally lower at 33.52 pesos.
The same day, the Indonesian rupiah plunged to an all-time low of 3,125 to the US dollar on worries about the country's banking and corporate sectors and fears that its credit outlook was next on the downgrade list.
The Thai baht closed weaker at 35.20 to the dollar offshore Friday ahead of Saturday's vote in Bangkok on the constitution and the censure motion. The Singapore dollar, affected by regional uncertainty, was also lower at 1.5230 to the US dollar.
Following the key Thai parliamentary vote Saturday, speculation shifted to whose heads will roll as Premier Chavalit, paying the price for political survival, negotiated with coalition partners on the makeup of his cabinet.
Southeast Asian currencies have fallen sharply since the Thai baht's de facto devaluation in early July shattered international confidence in the once booming region, which is now facing an economic slowdown.
Officials of the IMF and World Bank, along with some western countries, last week reacted frostily to a proposed new facility to help stabilize troubled Asian economies. Japan is supporting the plan but the United States would only go so far as to agree to discuss the idea.
As Southeast Asian countries pressed their case of a bailout fund, bankers and economists were divided on the need for, and viability of, a new facility apart from the IMF, the traditional banker of last resort for member countries.
Thai Finance Minister Thanong Bidaya said during the IMF and World Bank meetings that the fund could be as large as US$100 billion.
Eddie Lee, regional economist with investment house Vickers Ballas in Singapore, said "on the one hand, there is an argument that the fund is needed as a disincentive to speculators."
But he said "there are people opposed on the argument that if countries are going to be bailed out so easily, then there is no incentive" for countries to watch after their economies more carefully.
A European banker who attended the IMF and World Bank sessions said the bailout plan was "basically a very good idea because it creates a feeling of togetherness and a feeling of unity which is always good for a region."
Asked about the view that a bailout fund might encourage irresponsible behavior, like giving a teenager a credit card, he said: "It's a matter of the limit. If it's unlimited then you're in deep trouble."