SE Asian currencies on slippery ground
SE Asian currencies on slippery ground
SINGAPORE (Reuter): Southeast Asian currencies remained on slippery ground yesterday after coming under renewed pressure as the Thai baht slid to new lows.
Poor market liquidity and wide spreads added to market volatility as players turned increasingly nervous ahead of an Asian central bankers meeting in Shanghai on Friday.
Dealers said expectations the meeting might produce some form of coordinated intervention to counter the speculative onslaught on the region's currencies kept the dollar in demand.
"The big issue for the market at the moment is this meeting in Shanghai as there is the possibility of concerted intervention or a statement that they are willing to join hands to support currencies," said Chiang Yao Chye, economist at CIBC Wood Gundy in Singapore.
The Thai central bank intervened to stem the baht's slide as it was pulled down by heavy commercial demand for dollars.
"We noticed the central bank intervened to stop the baht's fall at around the 32.50/32.60 to the dollar level," a senior dealer at a local bank in Bangkok said.
The baht hit a record low at one point with some dealers reporting transactions at as low as 32.60 to the dollar. At 1050 GMT, it was quoted at 32.250/32.550 onshore and 31.500/31.550 offshore.
Dealers attributed the sharp plunge in the onshore market mainly to sales by importers seeking dollars to pay their bills and by corporations needing the dollar to repay foreign loans.
They said the central bank did not need to sell large amounts of dollars to curb the fall because the pressure was mainly from local players trading in small amounts.
A senior Thai central bank official attributed the baht's weak tone to poor first-half earnings reported by local banks and finance companies.
The Singapore dollar succumbed to fresh selling after comments by Finance Minister Richard Hu which players treated as yet another signal to buy the U.S. dollar.
Hu told parliament Singapore dollar's exchange rate was determined by market forces and its recent appreciation against its neighbors, especially the baht and Indonesian rupiah, did not pose a significant threat to its competitiveness.
"Our exchange rate policy should not be guided by short-term expediency considerations. We always focus on managing the exchange rate of the Singapore dollar on a trade-weighted basis with a medium-term perspective," Hu said.
The Singapore dollar fell to a low of around 1.4690 to the U.S. dollar after the comments, compared with 1.4645 earlier.
The Malaysian ringgit was hit by fresh waves of selling by offshore U.S. banks despite talk that the central bank had intervened to sell dollars around 2.6350/70 ringgit.
The ringgit was quoted at 2.6355/85 to the dollar against a morning low of 2.6230.
"We are not sure if there is any intervention at all. The said banks could be taking their own positions," a dealer at a Malaysian bank in Kuala Lumpur said.
The Indonesian rupiah remained weak after being dragged down by the slump in the baht. Spot rupiah was at 2,587/97 against an opening of 2,570/80.
"We saw some central bank intervention at the 2,580 level which helped boost the rupiah to 2,540 level in late morning, but uncertainty in Thailand kept the dollar tone biddish," a U.S. bank dealer in Jakarta said.
"If the rupiah could break the 2,500 resistance level, then there is potential for a strong comeback. But if it falls below the 2,600 level, speculators would launch an attack to test the band again," a local bank dealer said.
The Philippine peso fell on commercial demand for dollars, closing at 28.50 to the dollar against 28.15 previously.