Regional currencies strengthen again
Regional currencies strengthen again
SINGAPORE (Reuter): Southeast Asian currencies strengthened yesterday, propelled by optimism from Malaysia's policy U-turn after weeks of gloom, but dealers and analysts said the reprieve could prove short lived.
Malaysia's decision to delay major infrastructure projects and reverse a week-old ban on blue chip short-selling lifted stock and currency markets across much of the region.
"It's been quite a spectacular recovery today, but I think we have to be braced for more volatility," said Jacqueline Ong, regional economist at I.D.E.A.
In Thailand, a waning of anxieties about the government's support for a new draft constitution boosted sentiment, helping the baht stage a rare rally.
Prime Minister Chavalit Yongchaiyudh said on Friday his coalition supported the draft, easing the way to approval of sweeping changes to the system and an end to money politics.
Chavalit's earlier failure to take a decisive stance on the issue had prompted fears of public unrest.
Thailand's attempt to ease a liquidity squeeze by reducing the maximum dollar-holding period for exporters to 120 days from 180 days and cutting bank reserve requirements further helped the baht, analysts said.
"This is a positive move because it will indirectly generate more demand for baht. But I'm not sure what the impact will be for corporates if they have to commit themselves no matter how unfavorable the exchange rate might be," said I.D.E.A.'s Ong.
The baht was at 36.00/30 to the dollar onshore at 0945 GMT after rising to a high of 35.10, against 36.95/37.20 late on Friday. It was at 34.00/50 offshore against 35.20/35.50.
The Malaysian ringgit shot through the key 2.90 to the dollar level as overseas and interbank players sold dollars in afternoon trade.
The ringgit was at 2.8880/8930 at 0945 GMT against an opening around 2.9400. The currency has recovered over five percent of its value from an all-time low of 3.0520 to the U.S. dollar on Thursday.
The Kuala Lumpur stock index was also lifted by the government's policy decisions on Friday and a downward revision in the 1997 current account deficit forecast at the weekend. It ended up 7.7 percent at 879.71, its day high.
The forecast for the current account deficit for 1997 was revised to 5.2 percent of Gross National Product from an earlier projection of 5.5 percent. The government also said it expected economic growth this year of more than 8.0 percent.
"The ringgit could see 2.87 in the near term, but that doesn't mean we won't see more downside," said Ong.
The Indonesian rupiah rose in the wake of the ringgit and baht, trading near its highs of 2,905/15 at 0945 GMT against an opening of 2,920/30.
But dealers said persistent demand for the dollar from domestic companies would continue to prey upon the rupiah.
The Singapore dollar breached the 1.51 level to the U.S. dollar to trade at 1.5030/40 against 1.5120/30 six hours earlier.
The Philippine peso also bounced up to close at 31.60 to the dollar after hitting a new low of 32.64, driving the central bank to sell dollars.
Central bank governor Gabriel Singson told reporters the bank had bought $32 million in late trade because Hongkong and Shanghai Banking Corp. had dollar inflows of $70 million.
The South Korean won finished lower, but its fall was cushioned by the central bank's repeated interventions to sell dollars in spot and forward markets.
The won ended at 907.80 against Friday's close of 907.00, after hitting a session low of 909.00.