SE Asian currencies wilt as rupiah dives

SE Asian currencies wilt as rupiah dives

SINGAPORE (Reuter): The Indonesian rupiah skidded to fresh lows yesterday as anxiety about possible corporate debt defaults fueled a dollar buying spree in very thin markets.

But dealers said the rupiah's drop of more than eight percent to an all-time low of 3,720 to the U.S. dollar had only a limited knock-on impact on other Southeast Asian currencies, most of which steered clear of their historic lows.

The rupiah continued to look fragile at 3,630/700 to the dollar at 1015 GMT against its opening 3,395/3,400.

Dealers blamed poor liquidity and wide spreads for the speed of the rupiah's descent, which saw it tumbling over 100 rupiah in less than an hour at one point.

"The fear of corporate defaults is rising overseas. It got worse with panic buying of dollars by local companies," said Ishak Ismail, market intelligence analyst at I.D.E.A. "From the looks of it, there was a lot of buying and no real resistance."

A shift in sentiment by U.S. funds which had gone long on rupiah, especially against the baht in recent weeks, also hurt the rupiah, dealers said.

Bank Indonesia's announcement of new facilities, including arrangements for swaps and forward purchases for registered exporters, gave the rupiah brief respite. But dealers said most positive news was being swept aside in the market's mad rush for dollars.

The Indonesian central bank said the swap facilities would guarantee foreign currency rates for genuine export activities, encouraging exporters to unload their dollar holdings.

The rupiah's plunge tripped up the ringgit, but caution ahead of Malaysia's Oct. 17 budget kept players from selling it too aggressively.

"Even with the nervousness in the rupiah, the ringgit is still trading in a range. U.S. names are all reducing their dollar positions before the budget," the head of Asian forex at a European bank in Singapore said.

"They're afraid the central bank might have to hike rates after the budget. That's the only way to defend the ringgit at the moment even at the expense of the economy," he added.

The ringgit was at 3.3600/50 to the dollar against 3.3150/230 late on Thursday, well off its historic low of 3.4080.

The ringgit was also dented by a Moody's Investors Service announcement that it was placing Malayan Banking Bhd and Public Bank Bhd under review for a possible downgrade due to a projected economic slowdown.

The Singapore dollar tracked the ringgit's decline, sliding to 1.5400/20 to the U.S. dollar against 1.5306/16 on Thursday. The Thai baht traded sluggishly, slipping to 36.40/50 per dollar onshore against 36.20/36.40 late on Thursday. It was at 35.55/75 offshore rate against 35.40/60.

"People are still not keen to go long on the baht in a big way with the weakness in other regional currencies. The market is also very thin," said a dealer.

The Philippine peso ended weak at 34.91 to the dollar against Thursday's 34.17 as dollar demand overwhelmed the effect of surging domestic interest rates.

Overnight interbank rates shot to a high of 90 percent after the central bank drained liquidity by borrowing one-week money at the higher rate of 14 percent on Thursday to meet quarterly money supply targets set by the International Monetary Fund.

The central bank's failure to intervene, after spending $68.5 million to prop up the peso on Thursday, contributed to the decline, traders said.

Bankers are due to decide on Monday whether to reimpose a volatility band, which would allow for the suspension of trade if the peso moves beyond a set range.

Turnover on Taiwan's foreign exchange market shot to an all- time high of US$1.539 billion as the central bank dumped millions of dollars to protect the Taiwan dollar from the same fate as the Southeast Asian currencies.

The Taiwan dollar ended unchanged at T$28.601 to the U.S. dollar. Central bank officials confirmed the bank's defense of the currency after the market closed, saying its value was reasonable and not undermining Taiwan's export competitiveness.