SE Asian currencies tread water as dollar sinks

SE Asian currencies tread water as dollar sinks

SINGAPORE (Reuter): Southeast Asian currencies stayed afloat
yesterday as the U.S. dollar fell sharply against the yen and
regional stock markets clambered further out of the depths.

The dollar toppled below the key 120 yen level and hit a low
of 118.40 yen on growing concerns that Japan may come under fire
at a Group of Seven meeting later this month due to its weak
economy and rising trade surplus.

But dealers and analysts said regional currency markets could
be in for more volatility and were unlikely to revisit the levels
seen before they were beaten down by a crisis of investor
confidence.

"The recovery, even if it comes about, is going to be gradual
and muted and what we've seen is probably the best we can get for
now," said Chia Woon Khien, head of Asian research at
Skandinaviska Enskilda Banken in Singapore.

She said international fund managers were wary of going back
heavily into Asian stock markets, partly due to fears of further
policy changes.

"I don't think people should be hopeful of a turnaround to
pre-crisis levels for some of the Asian currencies because there
was already a huge over-appreciation for some of them and that
needs to be adjusted," Chia added.

Dealers said speculative players appeared to be booking
profits after pushing the dollar to record highs against
Southeast Asian currencies in recent weeks.

In Indonesia, the rupiah held up despite a central bank cut in
interest rates for bilateral central bank certificates (SBIs) by
between one and two percentage points.

It was near its day highs at 2,880/85 at 10.00 GMT after
slipping to a low of 2,915 against an opening of 2,890/2,900.

Dealers said the rate cuts were widely anticipated and had
little impact. "People are already trading below SBI rates. I
think only a more significant cut could move the market further,"
a Singapore dealer said.

The Malaysian ringgit extended its rise in afternoon trade,
reaching a high of 2.8864 to the dollar. "Many feel that the
worst is over for the ringgit. Sentiment has improved and I see
no reason why dollar/ringgit should go back to the 3.00 level," a
European bank dealer in Singapore said.

Further gains in Kuala Lumpur stocks after the government's
decision to lift a ban on short-selling of blue chip counters and
delay major infrastructure projects also supported the ringgit,
dealers said.

The Thai baht rose as exporters began to unwind long dollar
positions after the central bank cut their maximum dollar-holding
period on Monday to 120 days from 180 days.

The government also cut both commercial bank mandatory reserve
requirements and imported short-term foreign funds reserves to
six percent from seven percent in an effort to ease a domestic
liquidity crunch.

The baht was at 35.40/50 to the dollar onshore against
36.20/36.40 late on Monday. Offshore baht firmed to 33.45/65
against 34.00/50.

The Singapore dollar was firm at around 1.5010/40 to the U.S.
dollar, but dealers said further gains were blocked by fears the
central bank might sell U.S. dollars.

Rumors the de facto central bank was looking to sell dollars
near the 1.50 level, possibly to prevent the Singapore dollar
from strengthening too sharply against its neighbors, capped the
domestic currency.

The Philippine peso rose as banks slashed long dollar
positions to meet a central bank requirement limiting their
dollar holdings to five percent of their capital or $10 million,
whichever is lower.

The peso ended at 31.30 to the dollar after hitting an early
high of 30.90 against Monday's close at 31.60.

Central bank governor Gabriel Singson said the bank had bought
about $19 million from commercial banks. an extension of his term
also lifted spirits.