SE Asian currencies take a battering
SE Asian currencies take a battering
SINGAPORE (Dow Jones): Battered by a barrage of bad news,
Southeast Asian currencies succumbed to downward pressure
yesterday, falling steeply against the U.S. dollar during Asian
trading hours.
The rupiah, the ringgit, and the Singapore dollar all dropped
heavily as factors as diverse as escalating riots in Indonesia
and a lack of bidders at a Singapore land auction prompted bank
dealers to sell down the region's currencies.
The baht alone escaped the sell-off, dropping only moderately
in the spot market, although a rise in U.S. dollar/baht swap
rates indicated that the Thai currency had not all together
avoided coming under pressure.
The rupiah led the way, plunging by 7 percent against the U.S.
currency during in Singapore, as a stream of reports from the
North Sumatra capital city of Medan described police firing live
rounds in an attempt to quell worsening anti-government riots.
Panic buying of U.S. dollars for rupiah, mostly by Indonesian
market participants, according to traders, pushed the U.S. dollar
easily up through successive resistance levels.
By late in Asian trading, the U.S. dollar was quoted at an
intraday high of Rp 8,675, up steeply from Rp 8,070 at the same
time the previous day.
In Jakarta, the rupiah was closed Rp 8,700 against the
greenback while in London, the currency was opened at Rp 8,900.
Other regional currencies also fell, partly on contagion from
the rupiah and partly on their own poor sentiment.
The ringgit headed down from early in the trading day as
dealers reacted to reports that the Malaysian government is to
set up a special body to aid companies in financial difficulties,
a move traders said would merely institutionalize a culture of
corporate bail-outs.
Contagion from any instability in Indonesia is likely to hit
the ringgit and the Singapore dollar hard, said traders and
analysts.
Although offshore market sentiment towards the rupiah is
dismal, the latest fall in the Indonesian currency is being
driven principally by Indonesian capital flight, rather than by
speculation by offshore players, according to traders.
"Nobody offshore is shorting the rupiah, the interest rates
would kill you,' said one trader at a European bank, explaining
that offshore rupiah interest rates of around 50 percent are
deterring players from borrowing the currency in order to sell it
short.
Instead proprietary traders are selling the ringgit and the
Singapore dollar, which carry much lower interest rates, as
proxies for the Indonesian currency.
"Paradoxically, any blow-up in Indonesia will have more effect
on the other regional currencies than it will on the rupiah
itself," warned Chia at Enskilda.
Despite the falls in other Southeast Asian currencies on
Wednesday and the credit downgrade of eight Thai financial
institutions by the Standard & Poor's rating agency, the baht
remained largely unaffected.
Late in Asia the U.S. dollar was quoted at 38.6050 baht,
relatively little changed compared with its level late Tuesday of
38.4250 baht.