SE Asian foreign exchange markets barely move
SE Asian foreign exchange markets barely move
SINGAPORE (Dow Jones): Southeast Asian foreign exchange markets were barely active yesterday, the majority finishing Asian hours almost utterly flat on the day.
Most traders and analysts considered the relief from volatility a temporary phenomenon, however.
The resignation on Thursday of Indonesia's President Soeharto and his replacement by former Vice President B.J. Habibie, has done little to change the grim outlook for regional currencies.
The rupiah itself scarcely traded yesterday, even though Bank Indonesia resumed clearing operations, which had been suspended for much of the week.
The Singapore dollar and the Malaysian ringgit saw healthier volumes, although few participants were prepared to establish fresh positions ahead of the weekend, leaving the markets little changed on the day.
Only the Thai baht moved appreciably, dropping abruptly in early trading after parliamentary opposition groups late Thursday thwarted the government's plans to issue debt to fund the restructuring of Thailand's crippled finance sector.
Bone-dry liquidity and mile-wide spreads deterred all but the most desperate from attempting to deal in the rupiah, which as a result was left unmoved by the announcement yesterday morning of Indonesia's new cabinet line-up.
Late in Asia the U.S. dollar was quoted at an indicative rate of Rp 10,850, down from an indicative Rp 11,200 late in Asian trading Thursday. The bid-to-offer spread was quoted at Rp 700.
The apparent stability of the rupiah and other regional currencies persuaded few market participants that Southeast Asian markets had bottomed out.
"The regional currencies are not a very good indicator of the risk in Asia at the moment, because there is no liquidity," warned Thio Chin Loo, regional strategist at Banque Paribas in Singapore.
Other analysts and traders agreed with this analysis.
Although the regional currencies may well strengthen into the coming week, the move will be unsustainable in the longer term, say traders.
Attention will focus on whether Indonesia's new president can successfully consolidate his grasp on power or popular protest for political reform will force his resignation too.
"It is very unlikely that Habibie can survive as president," said Thio at Paribas.
Most susceptible to instability in Indonesia are the Singapore dollar and the Malaysian ringgit.
With the rupiah moving little, against the Singapore dollar the U.S. currency ended Asian trading at S$1.6379, down a fraction from S$1.6385 late Thursday.
Against the Malaysian currency the U.S. dollar ended at 3.7970 ringgit, compared with 3.7675 the previous day.
In Thailand, fractious politics once again rocked financial markets after parliamentary opposition parties late Thursday blocked four government decrees paving the way for the issue of 700 million baht of domestic and international debt.
"This is a negative, but a welcome negative," said Saker at Crosby, who said the setback for the Thai government had served as a wake-up call for investors.
Late in Asia the U.S. dollar closed at 39.33 baht, up from 39.08 toward Thursday's Asian close. Most traders expect the U.S. currency to strengthen further in the coming week, as market participants cover short dollar positions following the government's reversal.