SE Asian central banks to check currency slide
SE Asian central banks to check currency slide
SINGAPORE (AFP): Central banks intervened yesterday across
Southeast Asia to support local currencies after heavy sell offs,
with some dealers warning the worst was not yet over for emerging
economies after the Mexican crisis.
"Unless the currencies of these emerging Southeast Asian
markets can stand on their own, they could face further slides
despite the intervention by the monetary authorities," a senior
Banque Nationale de Paris dealer here said.
Dealers in Singapore said the central banks of Malaysia,
Thailand, Indonesia and the Hong Kong Monetary Authority (HKMA)
were seen Thursday checking the slide of the local currencies in
the aftermath of Mexico's peso debacle.
"The central banks were actually providing what was needed to
calm the markets and then leave it to market forces," said Eddie
Tan, Citibank's vice-president and foreign exchange manager in
Singapore, Asia's second biggest foreign exchange center after
Tokyo.
Tan said heavy selling of the regional currencies might have
been overdone "because the economic fundamentals coupled with the
political stability in Southeast Asia were more solid that in
Latin America."
Mexico devalued its currency on Dec. 20 by 15 percent, which
sparked chaos in its economy. The peso has lost some 70 percent
of its pre-devaluation level against the greenback.
Despite assurances from regional leaders that the situation in
Southeast Asia was different from Mexico, investors seemed to
think all emerging markets were alike, analysts said.
Unlike Thursday when the spread between buying and selling
prices was so wide that "even an elephant could walk through it,"
the regional currencies seem to have recovered a bit yesterday, a
dealer said.
In Singapore, the Thai baht recovered to 25.12 against the
greenback at near close of trading from 25.65 on Thursday but the
Indonesian rupiah fell to 2,217 against the dollar from 2,200
previously. The Malaysian ringgit closed nearly unchanged at
2.5600 against the dollar.
Hong Kong
In Hong Kong, the local currency closed yesterday at 7.748-
7.749 to the dollar against Thursday's rate of 7.771-7.774. The
Hong Kong dollar is officially pegged at 7.8 to the U.S. unit.
The Malaysia central bank unloaded some US$400 million over
the last 24 hours to shore up the ringgit, dealers in Kuala
Lumpur said.
"This morning (Friday) the central bank was in the market with
more offers to sell the U.S. dollar in an effort to cap the
greenback's rise and support the ringgit," the chief money market
dealer of a leading commercial bank said.
In Hong Kong, the quasi-central bank HKMA withdrew another
HK$3 billion (US$477 million) from its exchange fund to support
the weakening local dollar, which is pegged to the greenback.
HKMA withdrew HK$5.42 billion from the banking system
Thursday.
"The HKMA's intervention is a clear warning for speculators to
stay off," said a foreign exchange dealer at Bank of East Asia.
Sources in Bangkok's financial market said the central Bank of
Thailand injected more than 10 billion baht (about $400 million)
into circulation through the repurchase market and window loans
to "build confidence in the money market."
"Now, dollar buyers are reconsidering what to do because the
central bank has injected enough dollars into the market. It
should be an expensive lesson for panicky traders," said Suthee
Lohsoponkul, a Nakornthon Bank official.
The Bank of Thailand denied rumors of a baht devaluation on
Thursday, when some panic selling drove sellers into Thailand's
interbank market to convert baht to U.S. dollars.
Charley Seliang, head treasurer of Bank Credit Lyonnais
Indonesia, said the Bank of Indonesia intervened in the foreign
exchange market twice yesterday.
"Indonesia intends to defend its currency, first because it's
afraid of losing investor confidence and, second, because their
debt, mostly denominated in yen and dollars, would carry a very
heavy weight if the Indonesian rupiah was dramatically devalued,"
Seliang said.