SE Asian currencies gain, baht cheers up

SE Asian currencies gain, baht cheers up

SINGAPORE (Reuters): The Thai baht greeted Prime Minister
Chavalit Yongchaiyudh's promise to resign with gusto yesterday,
bringing cheer to most Southeast Asian currencies.

The baht made a strong start after Chavalit's surprise
announcement late on Monday, sparking predictions that the rally
was overdone and would soon fizzle out.

But official assurances that political changes would not hurt
implementation of IMF-backed economic reforms and news of
government spending cuts kept the baht well bid through the day.

It ended at its day high of 38.60/80 to the dollar onshore,
more than five percent above late Monday levels of 40.90/41.00.
The offshore rate was at 38.40/50 at 1040 GMT against 39.85/40.35
previously.

"It seems the market is quite receptive to Chavalit's
resignation," a U.S. bank dealer in Singapore said.

He said spirits were further lifted by announcements that the
government would lop another 18 billion baht from 1997/98
spending, on top of a previous 100 billion baht cut.

Thai stocks also rallied with the composite SET index adding
6.9 percent to end at 478.33. But currency traders remained
conservative about the baht's potential for more gains.

"I just can't see dollar/baht continuing to come off. I can't
see the baht strengthening much further than 37.50/38.00," one
said.

Teo said Southeast Asian markets were in for more pain in the
next six to 12 months as Thailand and Indonesia moved to
restructure their economies in line with IMF requirements.

"The reaction we are seeing in the markets is more a technical
bounce from an oversold position," he said. "Currencies will
remain weakish but certainly not at the near panic collapses
we've seen," he added.

In Indonesia, the rupiah continued to rise on appreciation of
the government's efforts to reform the economy in response to a
massive IMF-led international aid package.

Dealers said the scramble caused by tighter liquidity after
three central banks intervened on Monday to buy the rupiah lifted
forward rates in early trade.

The value of concerted dollar sales for rupiah in Singapore on
Monday by the Bank of Japan (BOJ), the Monetary Authority of
Singapore (MAS) and Bank Indonesia was estimated at $300 to $500
million, senior Japanese traders said.

Singapore dealers said Bank Indonesia had intervened again on
Tuesday to sell dollars.

"They sold quite a few times even around the low of 3,210. I
don't think it was really big amounts but they tried to cap (the
dollar) above 3,270," the U.S. bank dealer said.

The rupiah was at 3,260/70 to the dollar against its New York
close at 3,205, sharply up from its Monday Asian close at
3,300/10.

The Singapore dollar was at 1.5555/75 to the U.S. dollar, off
its highs of 1.5450 after active U.S. dollar buying by local
banks below the 1.5500 level.

Dealers said there were rumors the dollar purchases were on
behalf of the MAS, which was believed to be buying back dollars
after Monday's intervention to support the rupiah.

Malaysia's ringgit was at 3.2675/775 to the dollar against
3.2600/700 late on Monday.

Dealers said selling was expected after the ringgit's recent
bounce, but they saw a further test of the 3.20 per dollar
resistance.

The Philippine peso ended higher at 34.84 to the dollar from a
previous 35.14 close. The central bank offered dollars at
34.85/90 pesos but found no takers.

Central bank governor Gabriel Singson said the policy-making
Monetary Board would discuss by how much to lower the overnight
lending rate at a regular meeting on Wednesday. The rate is at
16.125 percent.

Even the Taiwan dollar and South Korean won perked up on
Tuesday. The Taiwan dollar ended sharply up at T$30.730 against
Monday's 10-year low of T$31.245.

Dealers said investors took profit on U.S. dollar gains after
the central bank said on Monday the Taiwan dollar had lost too
much value.

On Tuesday, the central bank said the Taiwan dollar's recent
depreciation made Taiwan remained "extremely competitive" against
South Korea and Singapore in global export markets.

The South Korean won ended at 961.00 against Monday's 969.90
close after the central bank poured an estimated $300 million
into the market to support it.

Only the Hong Kong dollar slipped as traders unwound long
positions on a belief that the premium of Hong Kong dollar
interest rates over U.S. rates would wane.