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.