Regional money markets brace for eventful week
Regional money markets brace for eventful week
SINGAPORE (AFP): Southeast Asia's financial markets will focus on key economic reform measures to be announced this week in Thailand, Malaysia and Indonesia that could hasten the pace of recovery of regional currencies emerging from their lowest ebbs, analysts say.
"I think a period of tranquility will continue to reign," said Vincent Low, fixed income strategist at Merrill Lynch in Singapore, as he forecast currency trading patterns after the slight recovery in the Indonesian rupiah, Malaysian ringgit, Philippine peso and Thai baht most of last week.
"Volatility will be low as market participants will probably wait for the key announcements and analyze them," he said.
Thailand is scheduled to announce on Wednesday a major revamp of the country's troubled financial sector while Malaysia will on Friday unveil its national budget which Finance Minister Anwar Ibrahim vowed would contain the right stimulant to perk up the economy.
Indonesia, meanwhile, is expected to provide details on how the International Monetary Fund (IMF), which Jakarta has called to rebuild shattered confidence, will help to strengthen its financial sector.
A foreign exchange dealer with a European house said "positive" statements from the three nations would enhance the pace of recovery of the Southeast Asian currencies, which last week posted their first sustained gains since regional foreign exchange turmoil erupted on July 2 with Thailand's effective devaluation of the baht.
Analysts said Malaysian Prime Minister Mahathir Mohamad's remarks over the weekend on a so-called Jewish connection to currency turmoil in the region was unlikely to have an impact on the markets.
Billionaire US financier George Soros, accused by Mahathir earlier of masterminding the attack on the ringgit and other regional currencies, is a Jew.
"The market is slowly discounting what Mahathir says, as clearly evident last week when the ringgit rose despite his remarks which the market previously perceived as negative," Jimmy Koh, regional economist with London-based financial house I.D.E.A.
Foreign exchange analysts said recovery of the battered Southeast Asian currencies would be gradual.
"Basically, it's going to be a slow adjustment in terms of improvement for the currencies when it comes," said Daragh Maher, analyst with ING Barings.
"The recovery so far is sentiment-driven rather than fundamentally-driven so it all depends on the pace of real reforms," he added.
Following the recovery last week, the Indonesian rupiah, which at one point lost more than half its value due to the regional currency crisis, is now down by 38 percent to 3,360 against the US dollar since July 1.
The Thai baht's value has fallen by 44 percent to 35.60 against the greenback, the Philippine peso by 27 percent to 33.52, the Malaysian ringgit by 21.5 percent to 3.0670 and the Singapore dollar by 7.2 percent to 1.5330.
"I think the resistance level the coming week will be at 3.000 for the ringgit and 3,400 for the rupiah," Low of Merrill Lynch predicted.
Analysts said currency markets would particularly watch Thailand's financial restructuring program to be released on Wednesday to overcome enormous problems bugging its financial sector amid a deepening credit crunch.
They said news over the weekend about the quitting of key members of a Thai committee overseeing the rescue of crippled finance firms due to alleged political pressure might not have an immediate impact on the market.
"No one is going to jump to conclusions. They will wait for Wednesday," Koh of I.D.E.A. said.
Thailand's seriousness in putting its house in order after it received a global 17.2-billion-dollar aid package is being gauged because any renewed attack on the baht will lead to another meltdown in neighboring currencies.
Nearly half of the financial institutions in Thailand have been ordered to suspend their operations because of chronic cash flow and bad debt problems.
"The big question is whether we are really going to see something positive from the Thai government this time or is it going to be an anti-climax," said Alison Seng, analyst with US research house Standard and Poor's MMS in Singapore.