SE Asian currencies surge on rupiah rally
SE Asian currencies surge on rupiah rally
SINGAPORE (Dow Jones): Southeast Asian currencies soared against the U.S. dollar late in Asian trading hours yesterday.
Dealers said improved sentiment on the Indonesian rupiah sparked the regional rally.
Wednesday, the International Monetary Fund approved a US$1.3 billion increase in its existing standby credit facility to Indonesia and announced more than US$6 billion from various official sources would be available by the end of March 1999.
Then on Thursday, diplomatic officials from the Consultative Group on Indonesia - a grouping of donor countries - said they would likely raise US$8 billion or more for Indonesia at their meeting in Paris at the end of July.
"People have to impression that everybody is giving loans to Indonesia these days," said a trader at a U.S. bank in Singapore. David Fernandez, Asean economist with J.P. Morgan in Singapore, said that traders may be looking for a reversal of the dollar's move from 8,500 rupiah to 15,000 in May and early June.
"There are probably some adventurous traders who believe that the IMF money and the possibility of political stability are reason enough to take a small bet the rupiah could return to those levels quickly, and small bets are enough to move the rupiah in a large way in a market with such thin volumes," Fernandez said.
In the evening, the dollar was quoted at Rp 13,250, down nearly 7.5 percent from Rp 14,337 late Wednesday.
A trader at a U.S. bank in Singapore said he saw more offers to buy rupiah than actual deals done, but added that was enough to inspire hedge funds to begin closing out short positions against regional currencies across Southeast Asia.
"Hedge funds were closing out long dollar positions across the region," he said. "The market was caught long dollars in the ringgit and the Singapore dollar and the baht."
He said several market participants bought U.S. dollars at S$1.6900 on talk in the market that the Monetary Authority of Singapore, Singapore's de facto central bank, was doing the same.
"When the Singapore dollar broke through that level everyone got out," he said, pushing the Singapore currency even stronger.
At 0945 GMT, the U.S. dollar is quoted at S$1.6860, down from S$1.6925 late in Asian trading Wednesday.
At 0950 GMT, the U.S. dollar is quoted at 4.0935 ringgit, down more than 1.5 percent from 4.1600 ringgit late in Asia the previous day.
Against the Thai baht, the dollar is quoted at 40.5650, down nearly 2 percent from 41.3250 the previous day.
On the Philippine dealing system, the peso also gained, but it was nothing so dramatic as its Asean cousins.
The U.S. dollar closed at 41.645 pesos (PHP), down from Wednesday's close of 41.690.
Analysts and traders remain doubtful, however, that the rally in Asian currencies is sustainable.
A U.S. bank trader in Singapore said regional currency strength still depends on dollar/yen, which has been driving the broad direction of the regional currencies for the past several weeks.
In Northeast Asia, the South Korean won closed lower on dollar short-covering ahead of the long holiday weekend for Korea's National Constitution Day Friday, dealers said.
The dollar closed at 1,283 won, up slightly from 1,282 Wednesday.
Dealers also cited nervousness that the won, which has risen about 2.5 percent so far this week, had gone too far against the dollar.
Korean central bank officials, meanwhile, said the won's recent strength is a temporary phenomenon due to excess dollars in the domestic market, and indicated the won won't continue to rise.
The New Taiwan dollar rose in line with the stronger currencies across the region, dealers in Taipei said, as foreign banks sold U.S. dollars.
The U.S. dollar ended at NT$34.357, down from NT$34.392 Wednesday.