S. Korean woes deepen Asian currency gloom

S. Korean woes deepen Asian currency gloom

SINGAPORE (Reuters): South Korea's financial crisis helped kick Asian currencies lower yesterday as institutions bought dollars ahead of the weekend.

Deepening concern over the fate of the Korean economy knocked almost 5 percent off the Seoul stock market and pushed the South Korean won to a historic low of 1,172, from around 1,120 at Thursday's close.

The won sell-off was triggered by reports the economy would need at least US$60 billion in aid from the International Monetary Fund (IMF) or elsewhere in order to bolster market confidence.

A figure of $20 billion had previously been discussed.

Dealers were also dismayed by talk Japan would be expected to come up with a substantial part of this aid.

Japan has problems of its own and is only just recovering from shock at the closure of one of its "Big Four" investment houses, Yamaichi Securities, on Monday.

"The Korean news has just added to the mood," said Andy Tan, general manager at Standard & Poor's/MMS in Singapore. "But all the Asian markets have their own local bad news."

Dealers said distrust of Asian currencies meant some institutions were prepared to go long dollars over the weekend.

"There's no change in the story for Asia. Things are still looking lousy," said a U.S. bank dealer.

"Bad news could come out over the weekend, and it is probably best to be long dollars. The dollar is one of the best removed from this (Asian) currency situation at the moment."

Kobus van der Wath, chief treasury economist - Asia-Pacific at Standard Chartered Bank, said he expected the dollar to gain further against Asian currencies next week:

"I would expect another week where you see the dollar in a slightly firmer range than it has seen over the last 1-2 weeks." The South Korean won was expected to slip a little further.

"It won't take much to get to 1,200 won to the dollar. But I'm not looking for a range beyond 1,200 on a sustained basis next week. I think it possible that you will see the level but then it will probably come back," Van der Wath said.

After a reprieve on Thursday for Thanksgiving, taking many bearish U.S. players out of the market, the Japanese yen fell back to a low of 127.90 to the dollar and then steadied around 127.50, a position most dealers felt it could hold for a while.

In Southeast Asia, the Singapore dollar fell after a bank hiked prime rates by 0.5 of a percentage point to 6.5 percent. Dealers said higher interest rates were seen trimming economic growth a little.

The Singapore dollar stood around 1.5942/52 late in the Asian afternoon, down from a high of around 1.5875 on Thursday.

"Sing will remain rangey. I would still say buy the dollar in the dips. The 1.5970-level will remain a high for dollar/Sing for a while unless the rest of the currencies blip down much lower...We see 1.62 (for dollar/Sing) January," said a dealer.

The Malaysian ringgit slipped back down through the 3.50 level to 3.5050/150 late in the Asian afternoon.

Dealers said early ringgit short-covering had petered out, to be replaced by corporate demand for dollars.

"We are still aiming at 3.60," said one analyst.

The Thai baht fell through 40 to the dollar after Moody's cut ratings for Thai bank deposits, bonds and notes to reflect poorer credit and financial fundamentals.

By the late Asian afternoon, the baht was quoted at 40.15/23 onshore and 40.23/43 offshore with the short-term direction still seen lower by most dealers.

"We see dollar/baht at 45.00 early 1998," said one dealer.

The Indonesian rupiah was unchanged at 3,640/50 due to a public holiday in Jakarta. Most dealers expected to see "38 figure" (3,800 to the dollar) over the next month.

The Taiwan dollar fell to 32.273/300 to the U.S. dollar as strong demand from the military for the U.S. currency emerged in late trade. The Hong Kong dollar was steady at 7.7298/08.