SE Asian currencies likely to remain bearish this week

SE Asian currencies likely to remain bearish this week

SINGAPORE (AFP): Southeast Asian currencies could face a new
round of attacks this week following the scare over the Hong Kong
dollar and a Thai cabinet shakeup which is unlikely to impress
the market, analysts said.

Uncertainty over Indonesia's talks with the International
Monetary Fund and Singapore's declaration that market forces
would set the value of its dollar could also affect sentiment
when trading resumes Monday.

"We're waiting for more volatility ahead especially with the
North Asian currencies now under pressure," said a regional
economist with a financial research house in Singapore. "It's
probably just the beginning."

The Taiwan dollar and the South Korean won succumbed to
pressure while the Hong Kong dollar was defended at a massive
cost last week as speculators who have hammered Southeast Asian
currencies since July trained their guns northward.

The attacks eased Friday, but dealers and economists believe
it was just a pause before the market again tests the Hong Kong
dollar, the last major Asian currency still pegged to the U.S.
dollar.

The territory's crisis had a knock-on effect on Southeast
Asian currencies, which recovered some ground but are still
hovering within striking distance of recent record-setting lows.

"I think the tendency is for people to be long on the U.S.
dollar again. Nobody is really convinced that it's over," said
Daniel Lian, head of Asian markets research for the Australia and
New Zealand Banking Group Ltd. (ANZ).

Thailand underwent a cabinet reshuffle over the weekend as
embattled Prime Minister Chavalit Yongchaiyudh, ignoring public
pressure to resign, put together a new team after intense
bargaining in the fractious coalition.

Kosit Panpiemras, executive director of Bangkok Bank, the
country's largest bank, was named finance minister, replacing
Thanong Bidaya, who quit after the premier rescinded a cabinet
decision to raise oil taxes.

Som Jatusipitak, president of the smaller Siam City Bank, was
named commerce minister.

"The whole cabinet lineup is like old wine in a new bottle,
and it doesn't seem that they can inject a lot of new ideas to
tackle the political and economic crisis," ANZ's Lian said.

Another Singapore-based regional economist described
Thailand's new economic team as "second-tier choices."

"I expect spurts of weakness to emerge on the regional
currencies because we may see more speculation in Hong Kong
itself or the other places like Thailand if there's more bad
news," the economist added.

The Singapore dollar closed Asian trading Friday at 1.5810 to
the greenback, the Thai baht at 38.85, the Malaysian ringgit at
3.3820, the Indonesian rupiah at 3,590, and the Philippine peso
at 35.10 to the dollar.

The ringgit and baht touched record lows last week. The
Singapore dollar, so far the least scarred by the currency
crisis, fell to its lowest level since early 1994 when it briefly
slumped at 1.5974 to the dollar before interest rates surged and
stopped its descent.

Senior Minister Lee Kuan Yew, addressing top U.S. businessmen
at a forum in Boston last week, confirmed market belief that
Singapore was deliberately allowing its currency to slide despite
having massive reserves to defend it.

Economists say such "competitive devaluation" is necessary
because Singapore may lose out to neighbors like Malaysia if the
ringgit depreciates much faster, making its electronics and other
exports cheaper to the U.S. and other key markets.

Singapore Finance Minister Richard Hu said market forces would
set the Singapore dollar's value, and the Monetary Authority of
Singapore would only step in to prevent "violent fluctuations."

"In the weeks ahead, the greenback has more upside potential,"
said Tan Kee Wee, a curency specialist with the United Overseas
Bank of Singapore.