Regional currencies recover after sharp fall in rupiah

Regional currencies recover after sharp fall in rupiah

SINGAPORE (Reuters): Regional currencies recovered after an
early trouncing yesterday following a sharp fall in the rupiah in
London and New York amid deep concern over the deteriorating
situation in Indonesia.

Riots shook the North Sumatran capital Medan for the third
successive day on Wednesday, killing at least one people.

The trouble cooled yesterday but troop convoys were moving
through the city in a show of strength.

After a frightening slide to the 10,000 level the rupiah
recovered some of its poise after the Indonesian central bank
hiked key interest rates between four and 12 percentage points.

In late Asian business the rupiah had recovered to around
9,600 per dollar but was still nearly 9 percent down on the day.

Dealers said hedge funds, which had built up long dollar
forward positions, were now well positioned with forward points
kicking up as the spot currencies came down.

Some even said the funds were actively pushing spot lower in
order to make these forwards even more profitable.

The ringgit stood out with a nasty drop to the key 4 per
dollar level. It recovered alongside the rupiah later, although
seemingly good trade data hid a massive collapse in imports.

The Korean won sank around 2 percent to flirt with the 1,400
level on concerns over the regional instability but mainly
because of growing labor unrest.

The Korean Confederation of Trade Unions has threatened to
call a general strike late this month or early next, demanding
renegotiations on the revised labor law allowing mass layoffs.

"Labor unrest has picked up following the announcements by
labor leaders to stage an all-out strike in May or June and we
could see strong government retaliation," said Thio Chin Loo,
strategist at Paribas in Singapore.

"The won's base at 1,300 is firm and renewed selling activity
in Asian currencies and domestic concerns should see it head back
towards the higher end of its 1,300 to 1,500 range fairly soon,"
she added.

The Philippine peso gained some ground after a shaky start but
investors are still looking to be long dollars going into the May
11 presidential election.

The Philippine central bank indulged in some verbal
intervention saying it would implement measures to defend the
peso if the situation warrants.

But they did not say what the measures would be.

The Taiwan dollar strengthened slightly following a surprise
trade surplus of US$272.2 million for April. But worries about a
decline in exports were confirmed with exports down 7.3 percent
year-on-year, while imports fell 11.9 percent.

The Thai baht strengthened to above the 40 per dollar level
after sliding to a low of 40.45 earlier and the Singapore dollar
was down amid concern over the problems in neighboring Indonesia.