SE Asian currencies fragile despite IMF bid of confidence
SE Asian currencies fragile despite IMF bid of confidence
SINGAPORE (AFP): Southeast Asian currencies could face new tests despite a thumbs-up from IMF chief Michel Camdessus amid turmoil in North Asia and fears that financial malaise could creep worldwide, bankers said.
The managing director of the International Monetary Fund (IMF) toured Southeast Asian countries last week to meet presidents and prime ministers, lauding their efforts to put their economies back into shape.
He predicted a new period of sustained high growth after a short and sharp adjustment, but his optimism failed to rub off on regional currencies.
"He has to say such things," said a Singapore-based currency analyst who remained pessimistic about short-term prospects.
Malaysian Premier Mahathir Mohamad, who accuses foreign speculators of bringing down the currencies, said over the weekend that depreciation may have wiped off some US$200 billion from the wealth of Southeast Asian nations.
Those behind the downfall of the region's currencies since July would "soon find that by making us poor, they will lose this market," he warned.
The Thai baht eased to 38.80 to the dollar offshore last Friday -- after surging to around 37 to the dollar at the start of the week -- as euphoria over the return to power of former premier Chuan Leekpai dissipated.
What remains to be seen is whether the appointment of a new Thai cabinet after markets closed Friday will inject strength into the baht this week.
The Indonesian rupiah, boosted earlier by a massive IMF-led rescue package, ended lower Friday at 3,440 to the dollar amid lingering concern over local banks.
The week before, it had closed at 3,280 following concerted intervention by the central banks of Indonesia, Singapore and Japan as part of an IMF-engineered economic rescue plan.
The Malaysian ringgit ended the week at 3.3200, lower than its close of 3.3000 the week before, despite an IMF assurance that the country needed no emergency help. The Singapore dollar closed lower at 1.5815 from 1.5675 the week before.
The Philippine peso was one bright spot, thanks to rising remittances of overseas workers ahead of the largely Roman Catholic country's irrepressible Christmas binge. It ended the week at 33.98, up from 34.85 the week before.
Tan Kee Wee, an economist with the United Overseas Bank, one of Singapore's top banks, said that "as calm has not really returned to the Asian region yet, there is every possibility" that regional currencies "could go into another tailspin this week."
Daragh Maher, an economist with Dutch bank ING Barings, said sentiment on most Southeast Asian currencies "is still quite fragile."
"We might not see the same degrees of volatility but a drift weaker in most regionals is quite likely," he said, adding that the impact of the currency crisis was just "beginning to feed through" the economies.
Eddie Lee, regional economist with investment house Vickers Ballas, said: "I'm not looking for a quick rebound at this point. North Asia has become a big question."
Much attention was focused on the Japanese yen last week after it fell past the 125 to the dollar level amid weakness in the Japanese stock market.
The South Korean won came within a hair of falling past the 1,000 to the dollar level but was pulled from the brink by the central Bank of Korea. It ended Friday at 986.50 to the dollar.
The Taiwan dollar, bumping around 10-year lows amid pressure on its two neighbors, closed the week at 31.24 to the dollar and was expected to test the 32 level despite warnings of central bank intervention.
U.S. Federal Reserve Chairman Alan Greenspan told the U.S. Congress that the impact of Asia's economic turmoil has been "modest" but not negligible, adding that U.S. exports could be "muted" depending on the extent of the Asian slowdown.
U.S. rating agency Standard and Poor's (S and P) said the pain inflicted on investors by economic turbulence in East Asia was turning many bank loans sour, and the risk may spread to banks in other regions of the world.