Rupiah, Thai baht extend declines

Rupiah, Thai baht extend declines

SINGAPORE (Dow Jones): The Philippine peso Thursday parted ways with other Southeast Asian currencies to trade higher against the U.S. dollar, after the country introduced new currency measures Wednesday, dealers said.

The Singapore dollar remained weak while the Indonesian rupiah and Thai baht extended their recent declines. In North Asia, the South Korean won and the New Taiwan dollar continued their uptrend.

Ongoing political uncertainty in Indonesia continued to roil the rupiah. At it's local Asian close, the U.S. dollar was quoted at Rp 7,423, up from Rp 7,385 late Wednesday.

A small bomb blast Wednesday night at the main mosque in Yogyakarta has raised concerns that inter-religious strife will sweep into the main island of Java from outlying areas.

The blast comes at a time of escalating sectarian violence in the Maluku islands and follows a rash of church-burning on the island of Lombok.

The impact of Indonesian President Abdurrahman Wahid's attempts to curtail the power of the military have also yet to be seen. Wahid confirmed Thursday that he has signed a presidential decree releasing four military officers serving in his Cabinet - including General Wiranto, the present security minister - from active duty.

While longer-term investors warily eyed new currency controls in the Philippines, traders rushed to buy the peso to avoid getting burned by tighter liquidity or even further restrictions.

The U.S. dollar closed at 40.380 pesos, lower from PHP40.495 late Wednesday.

The Philippine central bank said Wednesday it will impose a 90-day lock-in period for foreign funds placed in time deposits.

Central bank Deputy Governor Amando Tetangco said the rule was aimed at "plugging loopholes in the present system, which has been observed to be a source of (currency) volatility now and then."

Analysts said the move triggers fears that other currency control measures will be introduced, perhaps even threatening stock market investment.

The uncertainty over further policy moves will deter longer- term investment in the peso and boost the case for a higher U.S. dollar, they said.

"The move raises the country's risk profile," said Neil Saker, head of economic research at SG Securities.

But traders, worried about tighter liquidity in the market, are playing it safe for now and taking advantage of the higher return as three-month rates hover around 10 percent.

Lian Chia Liang, currency strategist at Merrill Lynch, said the peso's attractive interest rates could offset negative sentiment in the short term, and allow it to catch up with the Thai baht's large gains over the past few months.

"The baht has strengthened significantly, so people may go long the peso and short the baht," Lian said. "Some people are thinking along those lines."

Saker at SG Securities also said something to look out for is the International Monetary Fund's reaction to the Philippines' currency measure, particularly since it has softened its tone on currency controls aimed at curbing short-term capital flows.

Meanwhile, though the Singapore dollar managed to come off its intraday lows, it couldn't shake its weak tone against the U.S. dollar.

Late in Asia trade, the U.S. dollar was quoted at S$1.6890, little changed from S$1.6891 late Wednesday, but lower than its intraday high of S$1.6940.

Analysts variously attributed the Singapore dollar's weakness to political unrest in nearby Indonesia and to Singapore companies opting to invest their money overseas.

Although market players quibbled over whether actual U.S. dollar buy orders are being placed by Singapore corporates, they did agree that the news of major deals, such as the one announced earlier this week involving Singapore Telecommunications Ltd. and Cable & Wireless HKT, is taking a psychological toll.

Some players suggested that Singapore Airlines Ltd. has begun quietly accumulating U.S. dollars to pay for their acquisition of a stake in Virgin Airways.

In North Asia, the dollar fell against the South Korean won, ending the session at 1,125 won, down from 1,127.20 won late Wednesday.

Against the New Taiwan dollar, the U.S. currency ended at NT$30.778, lower than NT$30.794 the previous day.