Rupiah and peso strengthen sharply against U.S. dollar

Rupiah and peso strengthen sharply against U.S. dollar

SINGAPORE (Dow Jones): The rupiah and the Philippine peso
strengthened sharply against the U.S. dollar during Asian trading
hours on Monday, providing the only bright spots in an otherwise
dull session for regional foreign exchange markets.

After a relatively quiet day on Friday, the rupiah returned to
recent form on Monday, see-sawing through an impressively
volatile 10 percent range during Asian trading hours, after a
local newspaper reported that the Indonesian central bank is
contemplating introducing restrictions on rupiah convertibility.

The Philippine peso, meanwhile, rose to its highest level in
over three months, buoyed largely by healthy inflows of
remittance funds from expatriate Filipinos.

Among other Southeast Asian currencies the Singapore dollar
and the Thai baht ended the day little changed, while in North
Asian markets both the new Taiwan dollar and the South Korean won
ended higher.

In Singapore, the rupiah opened on a soft note as U.S. dollar
buying from offshore market participants pushed the U.S. currency
up to an intraday high of Rp 8,100 early in Asian trading.

The trend abruptly reversed direction when trading got
underway in Jakarta, however, as Indonesian banks entered the
market selling dollars heavily and pushing the U.S. currency back
down to a low of Rp 7,275.

Traders attributed the sudden sell-off to an Indonesian
newspaper report that Bank Indonesia is contemplating the re-
introduction of a fixed trading band for the rupiah.

Despite the dollar sales, offshore players largely dismissed
the reports as lacking credibility.

"I don't think Bank Indonesia can bring back a trading band so
soon after it abandoned the last one," said the same trader,
referring to the exchange-rate regime ditched by the central bank
in August 1997 at the start of Asia's financial crisis. Since
then the rupiah has depreciated by roughly 60 percent against the
U.S. dollar.

The Philippine peso also strengthened substantially on Monday,
rising by more than 1 percent against the U.S. dollar to close at
its highest level since mid-July.

In addition to healthy remittance inflows from Filipinos
overseas, which traditionally boost the peso towards the end of
the year, analysts also pointed to the expected disbursement
early in November of $260 million of International Monetary Fund
standby funding, which is also seen supporting the local
currency.

At the same time some offshore investors are enthusiastically
eying the Philippines' debt and equity markets in anticipation of
a rally.

At the close of trading in Manila the U.S. dollar was quoted
at 41.625 peso, down from 42.050 at the end of Friday's session.

Elsewhere in Southeast Asia, the U.S. dollar ended nearly flat
against the Singapore dollar after a sell-off in the U.S.
currency during New York hours Friday was rapidly bought back at
the start of Monday's Asian session.

Late in Asia the U.S. dollar was quoted at S$1.6261, just a
touch lower than S$1.6275 late on Friday.

The baht was also steady, with the U.S. currency ending Asian
hours at 37.58 baht, little changed from 37.60 at Friday's close.

In North Asia, the U.S. currency ended down against the new
Taiwan dollar and the won. In Taipei the U.S. dollar closed at
NT$32.777, compared with NT$32.898 at the end of the previous
session.

In Seoul the U.S. dollar ended the day at 1,313 won, down from
1,316 on Friday.

In Tokyo, the dollar rose against the yen, with strong buying
from Japanese institutions, dealers said.

The dollar was trading at 119.00-03 yen in late trading , up
from 118.15 yen in New York late Friday but down from 119.12-15
yen here Friday afternoon.