Rupiah leads Southeast Asian currencies higher

Rupiah leads Southeast Asian currencies higher

SINGAPORE (Reuter): Southeast Asian currencies were decidedly more upbeat yesterday as the Indonesian rupiah's strong gains and talk of funds unwinding long dollar positions lifted the gloom over the region, at least for the moment.

The rupiah breached the 2,700 resistance level early in the day and remained on firm footing despite news that Standard & Poor's (S&P) had revised its ratings outlook on Indonesian banks to negative from stable.

"The downgrading caused the forwards to move higher. But on the spot, a lot of customers were unloading long dollar/rupiah positions or getting into carry trades because of the high interest rates," a U.S. bank dealer in Singapore said.

The rupiah was quoted at 2,650/60 at 0940 GMT against an opening of 2,790/2,810. It was at 2,770/80 late on Wednesday.

Dealers said the Indonesian central bank's move to keep a tight rein on liquidity was drawing foreign funds back to the rupiah, but its rise would be blocked at 2,650 and 2,580, partly by Indonesian firms needing to cover unhedged positions.

The rupiah has recovered by over 11 percent since the central bank raised interest rates on Tuesday after the currency hit a historic low of 3,045 to the dollar.

Dealers said the rebound lifted sentiment for other regional currencies, although the Thai baht continued to look jaundiced.

The market was largely uninspired by International Monetary Fund (IMF) approval on Wednesday of $3.9 billion in loans, which will open the door to a $16.7 billion international loan package to help bail out Thailand's troubled economy.

Dealers said domestic players were concerned about a possible lifting of Thailand's two-tier market which could lead to a renewed offshore attack on the baht.

The baht was quoted at 32.65/75 to the dollar onshore against 32.30/32.45 late on Wednesday. The offshore rate was at 32.30/32.50 against 31.80/31.90.

Dealers said the baht showed little reaction to Bank of Thailand Governor Chaiyawat Wibulswasdi's announcement that the country would receive $1.6 billion in loans immediately as the first installment of the IMF aid package.

Chaiyawat also pledged to meet the IMF's economic goals to receive further aid.

"The market is still nervous being short dollars against the baht," the Singapore dealer said.

The Malaysian ringgit came off its highs after S&P said it was downgrading the outlook for Malaysia's top banks to negative from stable.

But dealers said the ringgit still showed a relatively firm bias and was quoted at 2.7650/60 to the dollar at 0940 GMT after hitting a high of 2.7565 against 2.7740/90 late on Wednesday.

The Singapore dollar firmed through the 1.50 level on talk of large U.S. dollar sales by hedge funds.

"There were rumors U.S. funds were selling huge amounts of dollar/Sing around 1.5000 so it fell to 1.4950 where some profit- taking came in," the dealer said.

"Today the market was quite wild and there was not a lot of rationale behind these moves," he said. The Singapore dollar was unlikely to strengthen beyond 1.4700 to the U.S. dollar anytime soon, he added. It was at 1.4968/78 at 0940 GMT.

Sharp gains in Southeast Asian currencies kept the heat off the Hong Kong dollar, which has been bracing itself for a speculative onslaught since late last week.

Hong Kong interbank rates rose early as investors switched funds into the surging stock market, but the Hong Kong dollar remained relatively steady at HK$7.7420/30 to the U.S. dollar.

The Philippine peso was firm at 29.85/95 in late trade against a previous close at 30.02 as the central bank kept its overnight lending facility closed for a second day.

Central bank governor Gabriel Singson said the move was a temporary measure aimed at curbing speculation in the peso.

The Taiwan dollar ended at T$28.724 against Wednesday's T$28.727 close as the central bank persisted in its defense of the T$28.727 level.