Regional currencies up late, rupiah hits two-month high

Regional currencies up late, rupiah hits two-month high

SINGAPORE (Dow Jones): Asian currencies were higher late
Thursday, with the Indonesian rupiah staging one of its strongest
performances in recent weeks and elevating its Southeast Asian
counterparts.

The dollar's retreat against the Japanese yen, fueled by
heightened speculation the Bank of Japan will end its zero-
interest-rate policy Friday, had also provided some support to
the Asian currency market, dealers said.

In late trading, the rupiah surged 3 percent to a two-month
high of Rp 8,350 to the dollar, from Rp 8,625 late Wednesday.

President Abdurrahman Wahid's move to delegate management of
day-to-day operations to Vice President Megawati Soekarnoputri
has taken some sting out of his critics. The move was aimed at
appeasing a hostile Indonesian parliament that has been eroding
his power base.

This prompted investors, who were bracing for some scathing
attacks against the president during the ongoing People's
Consultative Assembly meeting, to unload their dollar positions
against the rupiah, despite reservations about Megawati's
governing abilities, dealers said.

"The apparent change of heart the president has had with
regard to how he is willing to deal with his coalition partners
is positive," said Steve Brice, a currency strategist at Standard
Chartered Bank.

"Meanwhile, it also suggests that the new cabinet will have
representatives from the major parties, which would again be
positive for government cohesion," he added.

Brice said he expects the dollar to "form a base" around Rp
8,200 to Rp 8,250 in the short term, although the bank's year-end
target "is still for a higher dollar".

Also supporting the rupiah are reports a campaign is underway
in Indonesia's parliament to amend laws in order to close down
the central bank and replace it with currency board to stabilize
the local currency, dealers said.

Against the Japanese yen, the U.S. dollar had earlier in the
day hit a fresh three-week low of Y107.45 on heightened
speculation that the Bank of Japan will end its 18-month-old
zero-interest-rate policy Friday.

The other major gainer in Southeast Asia was the Singapore
dollar. It hit a three-month high against the U.S. currency.

The U.S. dollar was at S$1.7138, down from S$1.7215 late
Wednesday. The U.S. currency had briefly edged slightly below
psychological support at S$1.7100 earlier in the day. This was
the U.S. dollar's weakest performance since May 2.

Currency watchers warned that the Monetary of Singapore may be
uncomfortable by the Singapore dollar's sharp appreciation in the
past few weeks.

Besides riding on the strength of the Indonesian and Japanese
currencies, the Singapore dollar was also boosted by favorable
domestic economic data and the de facto central bank's
reiteration it was prepared to allow for a modest and gradual
appreciation of the Singapore currency in the next 12 months,
dealers said.

In the baht market, the dollar was at 40.725 baht, down from
40.955 baht late Wednesday.

The baht's vigor boosted the Philippine peso, which
strengthened to 44.725 pesos to the dollar at one point, compared
with Wednesday's close of 44.819 pesos.

But concerns over some fluctuations in the central bank's
gross international reserves had caused the peso to retreat,
dealers said. The dollar closed at 44.870 pesos on the Philippine
Dealing System.

The fluctuations in the level of the central bank's reserves -
from around $15.4 billion in June, to $14.8 billion in July, to
the most recent $15.5 billion - prompted many banks to maintain
long dollar positions, dealers said.

The region's firmer undertone also helped lift the New Taiwan
dollar to its highest level this month, dealers said.

The U.S. dollar finished at NT$31.069, down from NT$31.088
Wednesday.

In South Korea, a 2.7 percent surge on the stock market
propped up the won. The dollar finished at 1,114.50 won, down
from Wednesday's close of 1,115 won.