SE Asian monies drift sideways in lethargic trading
SE Asian monies drift sideways in lethargic trading
SINGAPORE (Dow Jones): Southeast Asian currencies drifted sideways against the U.S. dollar in lethargic trading during Asian hours yesterday, as participants searched in vain for a catalyst to give the market direction.
The rupiah remained all but untraded, ending the day flat as traders continued to give the market a wide berth as they awaited fresh political developments.
With Indonesia's tumultuous political scene enjoying a day of relative calm following the momentous events of last week, the yen re-asserted its baleful influence over regional currencies, dragging the Singapore dollar and the ringgit lower as it sank against the U.S. dollar.
The baht, however, shrugged off the Japanese currency's weakness to rise against the U.S. dollar after an opposition bid to torpedo a planned series of government bond issues foundered.
Elsewhere in the region the Philippine peso inched higher on minimal trading volume, while the won and the new Taiwan dollar both slipped lower in line with the falling yen.
Across the board, however, interbank trading was severely curtailed, as players sought fresh impetus.
"All of a sudden interest just dried up," complained a trader at a German bank in Singapore, bemoaning the lack of activity.
"Without Indonesia, the market has nothing to focus on," explained a trader at a U.S. bank in Singapore.
Against the rupiah, the U.S. dollar ended Asian trading at Rp 10,800 little changed from Rp 10,800 towards the end of Friday's session. With the bid to offer spread quoted at a gaping Rp 800, traders described the market as utterly dead.
As Indonesia's newly appointed President B.J. Habibie attempts to consolidate his tenuous grasp on power and some measure of political stability returns to the country, bolstered by the military's support for the president, many observers argue that boosting the value of the rupiah must be a priority.
"The challenge for the Indonesian economy is to get the exchange rate back up from where it currently is to make the operation of the economy viable again," said Australian foreign minister Alexander Downer, speaking in Canberra's parliament.
"Clearly current levels are not sustainable," said Prasenjit Basu, regional economist at CS First Boston in Singapore.
"With the rupiah at 10,000 to 11,000 to the U.S. dollar, corporate and financial Indonesia cannot function. I am sure that Bank Indonesia, which has now been granted greater monetary independence, will do everything it can to ensure the rupiah's recovery, and if that means raising SBI rates to 60 percent to 70 percent then it will not hesitate," said Basu, referring to the interest rates on Sertifikat Bank Indonesia paper, currently 50 percent on the benchmark one-month note.