Rupiah stabilizes against the greenback

JAKARTA (JP): The rupiah stabilized against the U.S. dollar yesterday on a positive market response to talks between the IMF team and Indonesian officials on the country's worsening economy, currency dealers said.

Stock prices on the Jakarta Stock Exchange improved 2.12 percent on some gains of blue chip stocks, with the main price index closing up 7.26 points to 350.23.

Currency dealers said the spot rupiah closed at 8,600/8,800 against an opening of 8,700/8,900 after falling to 8,950/9,200 in afternoon trading on increasing dollar demand by local corporations to pay their dollar obligations.

The rupiah closed at 7,800/8,300 to the dollar Friday after a drastic plunge to below 10,000 on the previous day.

"Overseas operators, including those in Singapore, were unusually nonaggressive today (yesterday) because I think they were worried that the talks (between the IMF team and Indonesian officials) could drive up the rupiah," a dealer with a local private bank said.

Trading volume was thin.

Dealers said the rupiah held on well in the morning, with more dollar offers coming from some players as they expected good news from the government's meeting with the IMF.

The Jakarta currency market was symbolically marked by collective dollar selling by some ministers, businesspeople and journalists to give their support for the rupiah.

And Asian currencies sat relatively tight during a moribund session as the market awaited the outcome of what is being seen as make or break talks between the IMF team and Indonesian officials.

Towards the end of last week analysts and traders had been looking seriously at the chance of Indonesia calling a debt moratorium but most are now cautiously confident this week's talks will yield some solid action and see economic and banking sector reforms finally put in place.

"Early indications are that talks are progressing well," Thio Chin Loo, strategist at Banque Paribas in Singapore, was quoted by Reuters as saying.

"Although the outlook for the regional currencies would hinge on developments in Indonesia/IMF/U.S. talks, a debt moratorium in Indonesia has been averted for now as well as capital controls and a fixed exchange rate regime."

While a number of Asian currencies were steady, the Thai baht plumbed new depths, sinking below 55.00 per dollar with traders unimpressed by the central bank's measures to curb currency speculation.

The Bank of Thailand said late on Friday it would step up scrutiny of foreign exchange markets and threatened to impose severe penalties for trading violations.

"There's been unwinding of long rupiah/baht positions. And the baht has also weakened after Friday's capital controls because not much action was taken," the Singapore dealer said.

The baht was at 56.20 to the dollar onshore against 54.00 late on Friday with the offshore rate at 56.00 against 53.00.

The Malaysian ringgit was softer at 4.6700 per dollar from 4.60 late on Friday, but dealers said its decline was being capped by dollar sales from U.S. funds above 4.70.

They said activity was subdued as the central bank stayed out after three straight days of intervention last week.

The Singapore dollar slipped to 1.7980 to the U.S. dollar from 1.7700 late Friday as domestic interbank rates eased. Overnight rate fell below 10 percent from highs of 36 percent last week, spurring speculation the authorities had added liquidity to the system in an effort to shore up the sagging stock market.

But any extra liquidity did little for the Straits Times Industrials index which closed 8.75 percent lower after dropping 23 percent last week.

"The stock market's been battered for the last three sessions. If it goes on like this, there'll be a lot of defaults and bank shares especially will be affected," a dealer said.

"I think the (Monetary Authority of Singapore) is monitoring the situation closely and will continue to put back liquidity to ease the crunch," he said.

The Hong Kong dollar was steady around Friday's 7.7430 close, but local interest rates and forwards rose sharply.

Dealers said the market appeared to be gearing for another attack on the Hong Kong dollar peg as the territory's stock market came under intense pressure.

The Hang Seng Index lost over 11.0 percent at one stage after Peregrine Investments, one of Asia's largest independent investment banks, went into liquidation.

"If the stock market continues to plunge, the pressure will be high to lift the peg," a dealer in Singapore said.

"If they're able to hold it for six months and the regional currencies stabilize, the speculators will get badly burned because of the carry costs," he said.

"But the funds are very much enriched by the Asian currencies fall, so they have a lot of firepower. It will be interesting to see whether the Hong Kong dollar can hold up."

Elsewhere, the South Korean won firmed to 1,735 per U.S. dollar from Friday's 1,810 close on foreign fund inflows to the stock market, and the Taiwan dollar weakened to T$34.480 per U.S. dollar against a previous T$34.100 close as the yen shed some gains.

The Philippine peso traded sluggishly at 43.650 to the dollar against Friday's 44.30 close.

The following table shows the drop in value of Asian currencies since the crisis began in July. Currency movements are in percentage terms and reflect the local unit's fall against the dollar, not the dollar's rise. (aly)

Currency Current value Move since July 1.

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Indonesian Rupiah 8,600.00 -71.74%

Thai Baht 55.85 -56.13%

Korean Won 1,735.00 -48.82%

Malaysian Ringgit 4.66 -45.86%

Philippine Peso 43.65 -39.29%

Taiwan dollar 34.48 -19.52%

Singapore dollar 1.80 -20.60%

Hong Kong dollar 7.74 -0.01%