Ringgit, rupiah and baht crash amid capital flight
Ringgit, rupiah and baht crash amid capital flight
SINGAPORE (AFP): The Malaysian ringgit, the Thai baht and the Indonesian rupiah dived into uncharted depths yesterday while the usually-robust Singapore dollar fell to a 38-month low amid a capital flight from Southeast Asia, dealers said.
Much of the capital is being diverted to financial instruments denominated in the U.S. dollar on the back of a strong U.S. economy, fund managers said.
Dealers said the regional currencies managed to recoup some losses amid profit-taking after lunch but fell again on reported remarks by Singapore Prime Minister Goh Chok Tong, currently on a visit to Japan, that market forces should be allowed to dictate currency values.
Goh was reported to have said that if foreign exchange was overvalued, central banks could not control it.
"This was interpreted by the market as market forces will have to dictate the direction of the currencies and there was a a quick reversal, with the U.S. dollar strengthening back," Alison Seng, analyst with U.S. research house Standard and Poor's MMS in Singapore.
Before Goh's remarks, the Southeast Asian currencies had recovered slightly from their new records lows on profit-taking by Hong Kong-based U.S. investment houses and selling of the greenback by the cash-rich Brunei Investment agency.
The Malaysian ringgit had tumbled to a new record low of 2.9620 against the greenback from Thursday's close of 2.8920 before recovering to 2.8875.
Pressure on the ringgit built up because of Malaysia's imposition of share trading curbs to shore up the stock market, coupled with warnings by Malaysian Prime Minister Mahathir Mohamad of more such measures to come.
Investors also dumped the Malaysian unit amid fears its ceaseless depreciation would exacerbate a worsening current account deficit.
"The contagion effects of the new Malaysian measures have brought a new element of capital flight from the region. They are definitely having an impact," said Daragh Maher, economist with ING Barings here.
"In this kind of environment, any bad news is going to provoke quite a big reaction. I don't see any signs of immediate reversal (in the decline of the currencies) and the best hope is they just stabilize."
Mahathir told Malaysian media editors Thursday that additional controls would be taken to prevent foreign fund managers from driving down the stock market through what he called "manipulative short-selling."
The Indonesian rupiah plummeted to an all-time low of 3,050 against the greenback from the 2,945 close Thursday after the central Bank Indonesia tried to inject liquidity and brought down interest rates which had been supporting the rupiah.
"Now, they seem to be beginning to bring the rates up," ING Barings' Maher said, citing the central bank's "difficult" task of striking a trade off between the detrimental impact of high interest rates and the adverse effects of a weak currency.
The rupiah recovered slightly from its new low to 2,890/2,990. The Thai baht also dipped to a record low of 34.50 from 34.20 Thursday in offshore trades amid rumors snap polls would be called in Thailand following economic chaos that culminated in the float of the baht on July 2.
The baht later recovered slightly in line with the other regional units to 34.20.
Dealers said the market was cautious with the baht after reports of a sharp depletion of Thailand's foreign reserves, acute foreign debt levels and warnings that the worst was not over for the economy.
The usually unflappable Singapore dollar dived in early trading to a 38-month low of 1.5370 against the U.S. dollar from 1.5175 Thursday amid rumors the Monetary Authority of Singapore (MAS), the de facto central bank, had stepped in to cushion the fall.
The Singapore unit later regained strength to the 1.5095 level.
The Philippine peso was at 30.40 to the dollar from Thursday's close of 30. 07 as foreign fund managers withdrew funds from the market, dealers said.