SE Asian moneys rise, then fall with baht

SE Asian moneys rise, then fall with baht

BANGKOK (Reuter): Southeast Asian currencies ended higher but below their best levels yesterday with the Thai baht giving up an early strong gain as operators took the opportunity to hoover up cheaper U.S. dollars.

Regional currencies were initially dragged up by the baht to levels not seen in a week, as optimism about an impending rescue package for Thailand's ailing economy spread through the region.

But while the Thai government's decision to seek help from the International Monetary Fund (IMF) boosted sentiment, there was still a long way to go and it was much too early to say the problems are over, dealers said.

"Today was a good example of how nervous people still are," said one Singapore-based bank dealer. "All the regionals followed the baht up this morning, but then some corporates and others said 'oh look, cheap dollars', and everything came back."

The Thai baht was at 31.50 to the dollar onshore at 0800 GMT after firming to 30.45 against 31.90-32.00 late on Monday. It was at 31.20 in offshore markets against a high of 30.00.

Dealers said the baht's morning rise was accelerated by relatively thin trading volumes.

"The baht has been trading very strong since they announced this (IMF news). But Thailand still needs lower interest rates so dollar/baht will not have much room on the downside," a dealer said.

Analysts said it was still Thailand's fortunes shaping sentiment for the entire region and all eyes would be on the economic rescue package likely to be announced on August 5.

Thai central bank governor Rerngchai Marakanond's resignation had been expected for some time and some players even viewed his departure as a positive development, blaming him for Thailand's economic crisis.

Rerngchai said he quit because of public criticism and political pressure but some analysts reckoned that it was more because the IMF will be calling the shots, not the central bank.

"It makes no difference who will be Rerngchai's successor in terms of policy. I would say for the next six months, the new governor would not have much choice but to walk to IMF line," said Kitti Limsakul, economics lecturer at Chulalongkorn University.

In Malaysia, the ringgit benefited from the baht's partial recovery and continued nervousness about the possible imposition of capital controls after Prime Minister Mahathir Mohamad's threats against speculators on Monday.

Dealers said stop-loss dollar sales and thin volumes added to the ringgit's gains and reckoned it was likely to benefit from month-end demand and speculation of possible curbs.

In late trade the ringgit was at 2.6210 per dollar after a high of 2.6170 and Monday's late 2.6350.

The Indonesian rupiah rose on offshore dollar sales but dealers said domestic dollar demand was blocking further rises around the 2,550 level.

"I think we may see attempts to break the 2,550 level as regional markets recover," a U.S. bank dealer in Jakarta said.

The Singapore dollar extended its rise, firming through the key 1.46 at one stage after breaching 1.47 in Monday afternoon business.

But the Taiwan dollar caved in to weeks of pressure, falling through a key support of T$28 in early trade as the central bank dropped its defense of that level, Taipei dealers said. It was at T$28.159 at 0800 GMT against Monday's T$27.972 close.

They said recent pressure on the Taiwan dollar stemmed from the U.S. dollar's rally against major currencies and from some speculative attacks in the form of non-delivery forward trading.