SE Asian monies come under selling pressure

SE Asian monies come under selling pressure

SINGAPORE (Dow Jones): The U.S. dollar's break below Y120 in
New York dealing failed to lend any support to Southeast Asia's
currencies, most of which saw more selling pressure during Asian
trading hours on Thursday.

Traders and analysts cited a number of forces driving the
rupiah's slide, as the U.S. dollar extended its run above Rp
9,000 for a second day, briefly trading to an intraday high of Rp
9,550.

"The main concern is that the riots in Ambon will spread to
other islands," said one regional currency trader at a U.S. bank
in Singapore.

Other market participants, however, dismissed the escalating
unrest in Ambon as a factor in the rupiah's fall. They argued
that the sell-off is in anticipation of mass bank closures, which
the government is expected to announce on Saturday.

"What action the government takes on Indonesia's banks is key
for the economy and for the currency," said Kate O'Donoghue, an
economist at Barclays Capital in Singapore.

"Although it will be some time before any measures are
implemented, and even longer before we begin to see results, some
people are prepared to trade on their expectations," she said.

Much of the buying pressure was attributed to Indonesian banks
in Jakarta, which were said by traders to be closing out short
dollar/long rupiah positions and trimming credit exposures ahead
of Saturday's announcement.

At the Asian trading close, the U.S. currency eased off its
earlier high to be quoted at Rp 8,975, down from Rp 9,075 on
Wednesday, with most dealers predicting further U.S. dollar
appreciation against the rupiah.

According to David Fernandez, regional economist at J.P.
Morgan in Singapore, market participants may be overplaying their
hand by bidding up the dollar against the rupiah at the present
moment.

"The market has got ahead of itself if it thinks there is
going to be a lot of progress on bank restructuring," he said.

Although Fernandez agrees with analysts who argue that banking
reform will dictate an easier monetary policy and lower interest
rates, he warns that does not necessarily mean the rupiah should
weaken over the short term.

"That would assume the authorities are going to be aggressive
in their moves on the banking sector. Once the restructuring
process gets going at full steam, we will see rates come down,
but I don't know if that will be in the near future," he said.

Towards the end of trading in Asia, the U.S. currency had been
pushed up to 37.57 baht, up from 37.49 baht late the previous
day.

The Singapore dollar also saw selling interest on Thursday,
with some dealers treating the currency as a proxy for the less
liquid rupiah.

Late in Asian trading the U.S. currency was quoted at
S$1.7362, up from S$1.7317 the day before.

Against the peso, the U.S. dollar ended domestic trading at
38.905 pesos, down from 39.020 pesos the previous day.

Against the won, the U.S. currency closed at 1,230.50 won,
compared with 1,233 won the day before.

Against the Taiwanese currency, the U.S. dollar eased to
NT$33.114, down from NT$33.120 at Wednesday's close.