SE Asian currencies stage tentative recovery
SE Asian currencies stage tentative recovery
SINGAPORE (Reuter): Southeast Asia's battered currencies
staged a tentative recovery yesterday as the market pinned its
hopes on an economic rescue package for Thailand.
Dealers said news that Thai leaders had agreed in principle to
tap loans from the International Monetary Fund (IMF) lifted the
baht and underpinned the region's other currencies.
Malaysian Prime Minister Mahathir Mohamad's stern threats of
possible punitive action against currency speculators also
spurred some nervous dollar sales by funds that had been piling
aggressively into the U.S. unit in recent sessions.
In Thailand, the central bank governor Rerngchai Marakanond
said any loan taken from the IMF would be channeled to assist the
whole economy, not to bail out any specific sector.
"If they (Thailand) were to take the loan, I'm sure one of the
trade-offs would be that they will have to lift the ban," on
local banks lending baht overseas, a Singapore dealer said.
He said a removal of the ban, imposed when the baht came under
fierce speculative attack in mid-May, would have to be coupled
with fiscal and monetary policies to protect the baht from a
renewed assault.
"With all this in hand, most traders would like to reduce
their positions, especially with it being the end of the month,"
he said.
Thai Finance Minister Thanong Bidaya said earlier in the day
he was seeking IMF advice this week ahead of an economic revival
package due by Aug. 5.
He said economic ministers would discuss a rescue package for
the economy, but the talks would not cover the question of
borrowing from the IMF.
Dealers said the focus had shifted back to Thailand, whose
economic troubles triggered weeks of regional currency mayhem,
after Friday's meeting of 11 Asian central banks in Shanghai.
A joint statement from the meeting provided no surprises,
leaving players grasping at its promise that members of the group
would work with the IMF to find answers to their economic
problems.
The baht strengthened through the 32.00 per dollar level in
afternoon trade, but dealers said its rise was likely to be
capped around 31.30 for the time being.
Elsewhere, Mahathir's's continued threats against currency
speculation caused the ringgit and Indonesian rupiah to rebound
on fears of the possible imposition of capital controls.
"The government has got some ideas on what to do but obviously
we cannot just publish what we want to do," The Malaysian leader
told reporters.
Dealers said the ringgit's rise to a high of 2.6310 to the
dollar was exaggerated by poor liquidity and wide spreads. The
ringgit was at 2.6390/405 at 0935 GMT against 2.6500 earlier.
"Now that the politicians have made it known that they're
unhappy with this situation, the funds would just pull out," one
said.
The move in the ringgit helped the Singapore dollar strengthen
through the key 1.47 level to the U.S. dollar but dealers said
its upside would be capped around 1.4670.
The Indonesian rupiah breached the psychological 2,600
resistance on offshore dollar sales. Dealers said the dollar fell
to a low of 2,565 before profit-taking helped it recover to
around 2,585/95 at 0935 GMT.
In the Philippines, the central bank raised banks' liquidity
reserves to three percent from two percent to mop up excess
liquidity in the system.
Earlier, it effectively cut the overnight borrowing rate to 22
percent from 25 percent, in a move it said was aimed at
encouraging banks to reduce their lending rates.