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.