Rupiah sold down on presidential poll fears

Rupiah sold down on presidential poll fears

HONG KONG (Dow Jones): The foreign exchange market reacted nervously to Indonesian President B.J. Habibie's selection of armed forces' chief General Wiranto as his running mate in Indonesia's presidential election, selling the rupiah down steeply against the dollar in Asian trading Wednesday.

Activity in other East Asian markets was subdued, with dealers generally bidding the dollar higher against the regional currencies, partly on fears of heightened tensions in South Asia following Tuesday's military coup in Pakistan.

Habibie's choice of Wiranto as his vice presidential candidate in the Oct. 20 election triggered a flurry of dollar purchases against the rupiah, largely executed by state-owned banks in Jakarta, according to dealers in the offshore market.

The volume of dollar bids was easily sufficient to clear out the offers which had previously capped the U.S. currency at Rp 8,000. With little resistance seen, and most of the news emerging from Jakarta seen as bad, most traders expected the dollar to appreciate further in the near term.

"It looks as if Habibie is trying to draw army votes away from Megawati, who is the market's favorite candidate, so in the short term people will buy dollars," said Simon Flint, senior currency strategist at Bank of America in Hong Kong.

Wiranto had been expected to throw his weight behind Megawati Soekarnoputri, the popular choice for president. He is regarded as a key power broker, not least because of the 38 seats controlled by the military in the 700-seat People's Consultative Assembly which is to elect the president.

By late in Asian trading, the dollar had been bid as high as Rp 8,080, up over 3 percent from Rp 7,827 late the previous day.

Other regional currencies for the most part took a back seat to the rupiah, but the Singapore dollar, the Thai baht and the Philippine peso all ended the day lower against the U.S. currency.

Although the coup in Pakistan wasn't a major factor influencing trading, some dealers and analysts did mention fears of rising tensions between Pakistan and India as a reason to buy dollars against Asian currencies.

Any escalation in border clashes between the two nuclear powers is likely to take some of the shine off Asian currencies in general, as nervous investors trim their exposure to the region as a whole.

The fall in the Singapore currency was attributed to U.S. banks, which were said by traders to be buying U.S. dollars following intervention by the Monetary Authority of Singapore on Tuesday.

Late on Wednesday, the U.S. dollar was quoted at S$1.6839, up from S$1.6791 toward the end of Asian trading the day before.

The Thai baht also fell Wednesday, although traders played down the significance of the decline, saying some profit-taking is only natural following the baht's 5 percent rise over the last two weeks.

Late in Asian dealing, the U.S. dollar was quoted against the baht at 39.65 baht, up from 39.45 baht late the day before.

The Philippine peso also closed a touch lower, with the U.S. dollar rising to finish the domestic session up at 40.440 pesos compared with 40.270 pesos Tuesday.

The South Korean won closed unchanged on the day after a round of U.S. dollar short covering late in the day erased the local currency's earlier gains.

At the close the U.S. currency was quoted at 1,205.10 won, the same level as at the previous day's close.

The New Taiwan dollar closed down marginally in line with the regional trend. At the close, the U.S. dollar was at NT$31.772, up from NT$31.768 the day before.