SE Asian currencies depressed
SE Asian currencies depressed
SINGAPORE (Reuter): The Singapore dollar's sudden drop through a key support level yesterday weighed heavily on other Southeast Asian currencies by triggering fresh buying of the U.S. dollar across the board.
The Singapore dollar fell through the psychological 1.50 to the U.S. dollar level in early trade and then slid to a 37-month low of 1.5140 on stop-loss sales before recovering a little.
Dealers attributed the bulk of the move to comments by a Monetary Authority of Singapore official who told reporters at an economic briefing that the Singapore dollar's level was appropriate to what was happening in the market.
The official of the de facto central bank said the U.S. dollar had been rising in currency markets and the Singapore dollar had depreciated by about five percent against the U.S. unit since the start of 1997.
The Singapore dollar was quoted at 1.5075/105 to the U.S. dollar at 0855 GMT against 1.4850/70 before the comments and dealers said it was likely head towards 1.53.
They said the market shrugged off news that Singapore's manufacturing sector expanded by 3.2 percent year on year in the second quarter of 1997 after three consecutive quarters of decline.
Singapore Prime Minister Goh Chok Tong said on Friday the economy was expanding faster than expected and would grow at between six and seven percent in 1997.
"They're supposed to be good figures but now the market is very short of (U.S.) dollars and nobody is looking at fundamentals at the moment," a U.S. bank dealer said. They said the drop in the sturdy Singapore dollar had set off selling of other Southeast Asian currencies as players increasingly grouped the region's economies together.
The U.S. bank dealer said the market was still short of U.S. dollars and a lot of long-term players, portfolio managers and corporations were looking to hedge their exposure.
The lack of aggressive intervention by Southeast Asian central banks was also playing a part in keeping regional currencies depressed, he said.
"The central banks realize that intervening aggressively just gives the speculators a chance to buy cheap dollars. So they're letting demand and supply determine the correct levels."
The Malaysian ringgit recovered some composure after hitting a 42-month low of 2.7930 to the dollar in early trade.
The Indonesian rupiah remained weak after coming under early pressure on spillover weakness from the ringgit and Singapore dollar. It was quoted at 2,641/44 against an early low of 2,655.
Analysts said the central bank's move to cut short-term interest rates on Friday sent a signal to the market that it was not prepared to defend the rupiah at the expense of economic growth.
The Thai baht continued to look weak, but trading in the currency was subdued with the Thai market closed for a holiday. Dealers said talk of an impending Thai cabinet reshuffle had little impact as the market had largely priced it in due to the country's economic crisis.
The baht remained uninspired by news that the International Monetary Fund and other Asian donors pledged a $16 billion loan package to Thailand on Monday.
The Philippine peso weakened on heavy commercial demand for a dollar in short supply. The peso was at 28.729/800 to the dollar at 0855 GMT against its previous close at 28.57.
Only the Taiwan dollar firmed as the central bank made its presence felt and domestic money market rates rose. It ended at T$28.718 after hitting a day low of T$28.765 against a previous close at T$28.728
Market -- Page 11