SE Asian currencies plunge to new lows

SE Asian currencies plunge to new lows

SINGAPORE (Reuters): Asian financial markets took another heavy battering yesterday as U.S. funds cut asset allocations and companies desperate to hedge their exposures fled regional currencies for the rampant U.S. dollar.

Several Southeast Asian currencies plunged to new lows, taking some stock markets down with them. The currency blight spread to Australia and New Zealand and gold dipped to a new 18-year low on worries about weak Asian economies and deflation.

Foreign exchange dealers said short covering lifted some currencies like the Malaysian ringgit and Singapore dollar off their early lows but the general undertone for regional currencies remained weak.

"The move down has been too swift and sharp. But there will be buying of dollars on any dips. Local corporates are still looking buying dollars for their own exposure," said a dealer with an U.S. bank.

Dealers said concern over the Malaysia's short term debt and nervousness over a budget speech by Indonesian President Soeharto later in the day as well as the cloud of gloom over regional economic prospects spurred dollar buying.

The dollar also strengthened against the Japanese yen, rising to a high of 134.38 yen in early trade, its highest level since April 1992, prompting the Bank of Japan to intervene.

"American funds have been pretty aggressive in buying dollars across the board. It is hard tell which currency is leading in this latest round of falls, whether it's the ringgit or the rupiah," said a currency dealer at a European bank.

"The Asian currency crisis is turning into an Asian debt crisis," said a dealer at an American investment bank. He said new figures from the Bank of International Settlement showing Malaysia's short term debt at 56 percent of total borrowings from overseas banks, higher than a general 30 percent estimate, spooked the market.

"It just shows that people do not have a handle on the situation," he said.

The Malaysian ringgit settled at 4.3450 at 0910 GMT after hovering between 4.1800 and 4.3400 throughout the day. Late on Monday it was at 4.0550.

The Indonesian rupiah hit a record low of 7,700 against the dollar in early trading but short covering brought it back up to its opening level of 7,000 in the late afternoon.

"The market is very thin and there is a lot buying of dollars by local corporates in Jakarta to cover their dollar exposure," an American trader said.

Dealers said the rupiah remained weak on fears that the government lacked the political will to meet the tough conditions imposed by the International Monetary Fund (IMF) for a US$40 billion loan package. The IMF targets include a budget surplus of one percent of Gross Domestic Product for the financial year beginning April 1.

Dealers said they expected dollar/rupiah to reach 8,000 in the short term and perhaps 10,000 over the next six months.

The Singapore dollar fell in sympathy with its two closest neighbors. The Singapore dollar touched a low of 1.7420 after opening at around 1.7200. It was hovering at 1.7345/85 in late afternoon.

Dealers said there was good two way interest in the dollar/Sing with U.S. fund buying met by local bank selling.

"I think the next target could be 1.80 for the dollar/Sing, especially with the other regional heading much lower," one dealer said.

The weak Sing pulled Singapore shares lower with the key share index shedding 3.80 percent, or 56.83 points, to end at 1,439.12.

"We are advising our clients to stay away. We are not even saying this is a right time to go in to search for good buys. Not in this market," said one share dealer.

The Thai baht plunged to a new low of 52 to the dollar after Bangkok said it wanted to review the IMF terms for its US$17 billion aid package.

The Philippine peso also fizzed downwards, breaching its third volatility band of 45.209 to the dollar in the afternoon, freezing all trades for the rest of the day.

The Bankers Association of the Philippines said it would to maintain the volatility band at a maximum of six percent until further notice.

The Taiwan dollar touched a 10-year low of T$33.999 in early trade and recovered to close at T$33.755, but still more than half a a Taiwan dollar below Monday's close of T$33.226.

Dealers said the local currency was suffering from fears of it testing the T$35 level as dollar demand continues to grow.

The Australian dollar toppled to 11-year lows as investors scrabbled for U.S. dollars. It was at $0.6375/70 in late trade from $0.6481/86 late Monday.