SE Asian currencies languish at week levels

SE Asian currencies languish at week levels

SINGAPORE (AFP): The Indonesian rupiah, Thai baht and the
South Korean won plunged to record lows yesterday and other
Southeast Asian currencies languished at weak levels with no end
in sight to exchange-rate turmoil.

Dealers said rising political and economic concerns
surrounding Thailand and the anticipated dismantling of capital
controls on the baht spilled over into other regional units and
spread even to the South Korean won.

"It was another ugly day for regional currencies, another very
volatile day," said David Cohen, senior economist at research
house Standard and Poor's MMS.

Mohammed Ali Ayub, head of regional foreign-exchange trading
at Union Bank of Switzerland, added: "The tone is weak on
regional currencies. The dollar is bullish across the board."

Bank Indonesia raised short-term money market interest rates
to halt the rupiah's slide and succeeded in lifting the currency
from a record low of 3, 020 to around 2,900 in late Asian
trading, dealers said.

"The rate hike signaled some new determination on their part
to resist the pressure on the rupiah," said Cohen, adding that
the higher rates would exact a toll on the Jakarta stock market.

The baht dived to an offshore low of 32.94 to the greenback, a
record for the Thai currency which was floated on July 2,
triggering the regional currency turmoil that has yet to abate,
dealers said.

The baht, which had been quoted at 32.40 to the dollar in late
Asian trade here Monday, just stopped short of hitting the 33
level. It ended at 32.80. In domestic trade, it slumped to a
record low Tuesday of 32.45-70.

Jacqueline Ong, economist at British financial house I.D.E.A.,
said offshore sentiment on the baht was "very weak" due to
political worries and expectations of a removal of Thai capital
controls.

Political concern stemmed from a cabinet reshuffle last week
by Thai Prime Minister Chaowalit Yongchaiyudh which sparked
dissent in his own party and from opposition within his coalition
to a draft constitution.

"Basically the baht sentiment offshore is very weak," Ong
said. "There is a lot of uncertainty in the political arena. That
is weighing down sentiment a lot even on the onshore market."

The Bank of Thailand in May created a two-tier foreign
exchange market by imposing capital controls that restricted
access to baht to offshore players in a bid to curb speculative
attacks.

Currency traders expect the controls to be removed any time as
part of a 16-billion-dollar economic rescue package brokered by
the International Monetary Fund.

If the controls are abolished, corporate players would rush
out to buy dollars to hedge against their dollar-denominated
loans, weakening the baht and other regional units further,
analysts said.

The market was also worried that any government changes could
adversely affect the implementation of the IMF-brokered rescue
for the beleaguered Thai economy, which sank into crisis on bad
debt fears saddling Thai banks.

Other regional currencies were weak, with the Malaysian
ringgit hitting an intra-day low of 2.8040 to the U.S. dollar and
the Singapore dollar 1.5186 before ending at 2.7990 and 1.5150.

They had closed the previous day at 2.7900 and 1.5165
respectively against the U.S. dollar. Traders said the Philippine
peso ended at 30.10 from the previous day's record low close of
30.14.

The Hong Kong dollar, which was pressured Friday against the
US dollar on fears that it would be the next target of
speculators, strengthened to 7.7385 to the greenback from 7.7412
at the previous day's close.

"The HK dollar spot rate is clearly maintained. But you still
see pressure in the forwards and higher interest rates," said a
dealer with a U.S. finance house.

Dealers said the Southeast Asian currency weakness seemed to
have spilled over into the Korean won, which fell to a seven-year
low of 901.00 won from 898.70 the previous day amid domestic
corporate worries.

Daragh Maher, economist at ING-Barings, said there was no
indication when investment sentiment on Southeast Asian
currencies would improve.

"It doesn't seem like fundamentals are driving this, rather it
is speculation and sentiment downturn. The sentiment is not going
to flip back immediately," Maher said.