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.