Rupiah leads sell-off amid worsening unrest

Rupiah leads sell-off amid worsening unrest

HONG KONG (Agencies): Escalating violence in Indonesia sparked a steep sell-off in the rupiah Wednesday, which in turn dragged other Asian currencies lower.

The Singapore dollar, Thai baht and Philippine peso all ended Asian trading hours considerably weaker as contagion spread beyond Indonesia's borders to infect other regional markets.

North Asian currencies were unaffected, but in Seoul the Korean government's repeated efforts to talk down the won bore fruit, as the local currency retreated further from the two-year high it set Monday.

The New Taiwan dollar ended flat in relatively thin trading.

The outbreak of inter-religious strife in the previously peaceful Indonesian island of Lombok, along with news of violent demonstrations by dispossessed farmers on Bintan near Singapore, was blamed for souring sentiment toward the rupiah early in the session.

Unconfirmed market rumors that the violence had spread to Jakarta further multiplied the pressure on the Indonesian currency, and in thin early afternoon dealing the U.S. dollar broke up through resistance at the Rp 7,300 level to hit an intraday high of Rp 7,245.

Traders and investors ignored the positive implications of U.S. Treasury Secretary Lawrence Summers' upcoming visit to Jakarta Thursday, the expected approval by parliament of Indonesia's 2000 budget and the signing of a new letter of intent with the International Monetary Fund which is due to follow.

Instead they focused on the bad news, selling down not just the rupiah, but other regional currencies.

"Most of the big funds that would move the market would prefer to be short dollars against the rupiah," said Simon Flint, regional foreign exchange strategist at Bank of America in Singapore. But "there's too much going on, too much violence, too much political uncertainty."

The greenback rose to Rp 7,335 from Tuesday's close of 7,250, S$1.6770 from 1.6750, NT$30.835 from 30.830, 40.695 pesos from 40.605, 1,134 won from 1,126.50 and 37.45 baht from 37.29.

In Singapore, the euro traded at 1.0123 dollars, up from Tuesday's closing here of 1.0114, according to Banque Nationale de Paris. The euro opened trading here Wednesday at 1.0139 dollars.

The dollar fetched 105.87 yen, up from 105.20 a day earlier here. The greenback opened at 105.73.

ABN AMRO Bank N.V. said the euro's high was 1.0163 dollars while the greenback's high was 105.80 yen.