Sliding rupiah further shakes Asian currencies

Sliding rupiah further shakes Asian currencies

SINGAPORE (Reuters): Asian currencies suffered from the
Indonesian rupiah's whims yesterday in the face of growing
international resistance to Jakarta's plans to adopt a currency
board system.

The rupiah pulled off its early low of 10,800 to the dollar
following persistent dollar sales by U.S. investment banks around
the 10,500 level.

But dealers said its outlook remained bleak against a backdrop
of growing social unrest, worries about the probable selection of
minister B.J. Habibie as vice president and mounting
international criticism of a proposal to peg the rupiah to the
dollar.

The Washington Post newspaper said IMF managing director
Michel Camdessus had written to President Soeharto expressing
strong disapproval of the plan.

"In the present circumstances ... if a currency board proposal
were adopted, we would not be able to recommend to the IMF Board
the continuation of the current program because of the risks to
the Indonesian economy," Camdessus said.

A European bank dealer in Singapore said offshore banks were
increasingly unwilling to deal with Jakarta banks due to a
growing credit squeeze, effectively leading to a two-tier market
for the rupiah.

Other Southeast Asian currencies were hit by the rupiah's
early drop but their falls were more muted and dealers said they
were beginning to show resilience to the rupiah's fortunes.

The Thai baht recovered from a low of 48.00 to the dollar
despite Finance Minister Tarrin Nimmanahaeminda saying
Indonesia's adoption of a currency board could complicate
Thailand's economic recovery efforts.

The baht was pulled down initially by dollar demand from
importers and other companies, expecting further weakness in the
Thai currency.

Central bank governor Chaiyawat Wibulswasdi urged investors to
differentiate between the baht and rupiah and said the baht's
rate at 45-48 per dollar showed an encouraging trend.

The Singapore dollar remained soft near the 1.68 level to the
U.S. dollar as operators worried about the country's exposure to
Indonesia.

"The funds are all taking a bearish forward view on the Sing
dollar. There was a lot of outright buying of dollars against the
Sing from U.S. investment houses this morning," the European bank
dealer said.

The Malaysian ringgit was also weak, but dealers said its fall
should be capped around 4.00 per dollar for the time being.

Prime Minister Mahathir Mohamad met his Singapore counterpart
Goh Chok Tong for the third time in a month to discuss the
regional financial crisis.

Malaysian Foreign Minister Abdullah Badawi said he knew of no
specific proposals to address the issue emerging from the
meeting, but added that "some general statements on how we will
deal with the currency situation will be put in the communique".
An official communique will be released on Tuesday.

The Philippine peso finished lower on the rupiah's slide, but
its fall was cushioned by a lack of corporate dollar demand.

Manila traders said the peso might also have been supported
indirectly by the central bank on Monday.

The Taiwan dollar was hurt by weakness in the yen, but pared
its early losses on active foreign fund inflows to the stock
market, dealers said.

The Hong Kong dollar was little changed and forwards shaved
some of their gains as improved interbank liquidity offset the
impact of Indonesian uncertainty on local interest rates.

The Seoul won ended down as foreign inflows to the stock
market -- a major source of support for the won in recent
sessions -- subsided.

Worries about the regional outlook and losses from Korean
investments in global derivative products and resulting disputes
with foreign banks also weighed on the won.

The Vietnam dong slid after the central bank lowered its
pivotal interbank rate by 5.3 percent to 11,800 dong to the
dollar, citing the impact of the currency crisis on trade
competitiveness and tourism.

Vietnam last allowed its currency to slide in October when it
used a widening of the permitted interbank trading band to
engineer a de facto devaluation of nearly five percent.