Rupiah's sparks enliven dull trading day
Rupiah's sparks enliven dull trading day
SINGAPORE (Dow Jones): In a day of generally muted trading in
Southeast Asian currency markets Tuesday, the Indonesian rupiah
provided the only sparks.
Fears that Bank Indonesia was attempting to push the rupiah
upward to end the fiscal year at an unrealistically high level
triggered a minor panic in early trading as offshore banks rushed
to cover their short positions in the Indonesian currency.
Although the stampede propelled the rupiah up by 4 percent
within a matter of minutes, the excitement proved short-lived. By
late in Asian trading hours the Indonesian currency had handed
back most of its early gains to finish the day barely changed
from levels seen on Monday.
In fact, with just one day to go to the end of Indonesia's
fiscal year, the rupiah was within a fine whisker of its level 12
months ago at the end of the previous fiscal year.
Elsewhere in Southeast Asia, the baht ended the session range-
bound, despite the announcement of significant fiscal easing by
the Thai government and the release of figures revealing a dismal
export performance in February.
The Singapore dollar and the Philippine peso both drifted
sideways, while in North Asia the South Korean won and the new
Taiwan dollar also closed little changed.
The flurry of activity in the rupiah market followed the news
on Monday that an international syndicate of 70 creditor banks
had agreed to restructure US$210 million of principal on a $350
million commercial loan.
When the word got out that Bank Indonesia was buying rupiah at
"value today" - for settlement on Tuesday, as opposed to the
normal "spot" transactions which settle two days subsequently -
there was a brief panic among the U.S. dollar bulls.
Traders assumed that by buying at value today and sucking
available rupiah liquidity from the market, the central bank was
mounting a major support operation ahead of the end of the fiscal
year.
Bailout
Anxious to cut their losses, U.S. and European banks were seen
bailing out of their short rupiah positions in the offshore
market, driving the Indonesian currency sharply higher.
But after being driven to a low of Rp 8,500, down from Rp
8,815 at the start of Asian trading, the U.S. currency soon
recovered its losses after meeting buying interest from onshore
banks.
By the end of Asian dealing the U.S. currency had edged back
up to Rp 8,725, a little down from 8,850 in Jakarta late Monday.
With the spot market all but closed down by Bank Indonesia's
action on Tuesday, traders expect little activity Wednesday as
the fiscal year actually draws to a close.
Elsewhere in Southeast Asia, the Thai baht was left unmoved by
the government's announcement of a 55 billion baht program of
fiscal easing centered on a cut in value-added tax.
There is little prospect of any significant movement in the
baht's exchange rate in the immediate short term however. Traders
describe the currency as tightly range-bound, with good interest
to buy the U.S. dollar supporting the U.S. currency at 37.50
baht, and selling interest capping its rise at 37.80.
Late in Asian dealing on Tuesday, the U.S. dollar was at
37.6750 baht, little changed from 37.6650 the day before.
The U.S. currency was also range-bound against the Singapore
dollar, trapped between bids at S$1.7310 and offers at S$1.7340,
according to dealers. In late Asian trading, the U.S. dollar was
quoted at S$1.7336, up slightly from S$1.7306 late on Friday. The
local market was closed for a holiday on Monday.
Against the Philippine peso, the U.S. dollar closed at 38.775
pesos, barely changed from 37.770 pesos the day before.
Against the won the U.S. dollar ended at 1,224.60 won, down a
fraction from 1,225.30 on Monday. Against the new Taiwan dollar
the U.S. currency ended the day at NT$33.145, compared with
NT$33.150 the previous day.