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.