Southeast Asian currencies leap

Southeast Asian currencies leap

SINGAPORE (Reuters): Southeast Asian currencies leapt yesterday as Indonesia's early efforts to reform its economy in response to a massive IMF-led aid package sparked hopes the region might be headed for a turnaround.

Asian stock markets, particularly Hong Kong and Singapore, also benefited from the rosier mood, rising substantially.

The Indonesian rupiah led Asian currencies higher, shooting to a high of 3,240 to the dollar, a gain of more than nine percent from its opening around 3,540/55 after Japan and Singapore said they had intervened to support the rupiah.

In separate statements released in Singapore, the two Finance Ministries said the Bank of Japan (BoJ) and Monetary Authority of Singapore (MAS) had intervened in Singapore foreign exchange markets with Bank Indonesia.

Singapore Finance Minister Richard Hu said in a statement the MAS bought Indonesian rupiah against the U.S. dollar in concert with the other authorities.

"Singapore's participation in this joint intervention reflects our confidence in the macroeconomic policies of the Indonesian government," it said.

Japanese Finance Minister Hiroshi Mitsuzuka said the operation was "aimed at correcting excessive depreciation of the Indonesian rupiah," and the three authorities would be ready to act again when necessary.

Dealers said the rupiah, which opened on an upbeat note, sharply extended its gains after the intervention was confirmed.

"The market was already very happy with the package...It was very timely to come in and strike while the iron was hot," said a U.S. bank dealer in Singapore.

She said Japan and Singapore had probably intervened in "token amounts" with Indonesia selling the bulk of dollars, but the move caught players off-guard in a market severely thinned by a Japanese holiday.

Singapore and Japan said on Saturday they were each ready to extend US$5 billion to Indonesia to supplement resources organized by the International Monetary Fund (IMF).

Indonesia could receive up to US$40 billion in financial aid from multilateral agencies and individual countries provided it meets strict IMF conditions to rehabilitate its economy.

Analysts saw Monday's joint intervention as aimed at curbing a further loss of confidence in Indonesia, especially in the face of Thailand's persistent woes.

"I guess regional central banks felt they could have done more in the case of Thailand. They didn't and things got worse, so if they didn't do anything aggressive now, they'd never turn it around," said Chia Woon Khien, head of Asian research at Skandinaviska Enskilda Banken in Singapore.

"Indonesia's case was also slightly less problematic so they were more willing to commit their money and the market was more willing to believe in their commitment," she added.

The Indonesian government liquidation of 16 unhealthy banks, some of them linked to President Soeharto's family, was welcomed by currency and stock markets.

"Indonesia has helped a lot. They've taken firm actions, unlike the Thais," a European bank dealer in Singapore said.

In August, the IMF organized $17.2 billion in aid for Thailand and on Monday the Thai baht was the only Southeast Asian currency to fall, plagued by political uncertainties and delays in implementing financial sector reforms.

The baht was at 40.90/41.000 to the dollar onshore at 1005 GMT, off a low of 41.00 against Friday's 40.70/41.00. It was firmer offshore at 40.20/40 against 40.60/90 previously.

Thai Prime Minister Chavalit Yongchaiyudh came under fresh pressure to resign on Monday as a key coalition partner, former prime minister Chatichai Choonhavan, quit his advisory post.

The market shrugged off expressions of confidence in the baht's long-term stability from Finance Minister Kosit Panpiemras, who urged Thais to refrain from buying foreign currencies unless absolutely necessary.

The Singapore dollar remained near its highs at 1.5525/55 to the U.S. dollar against an opening below 1.5740. Singapore's benchmark stock index ended the day with a hefty 7.83 percent rise to 1,703.95 points.

"It looks like dollar/Sing has seen a top at 1.5970. If it rallies to 1.5700/40 now, I'd favor a sell," another European bank dealer said.

The Malaysian ringgit surged to a high of 3.2500 against 3.4070/180 late on Friday.

Comments by U.S. financier George Soros also fueled buying of Southeast Asian currencies, dealers said. He told the British Broadcasting Corporation (BBC) he believed the world's financial turbulence was over and called for international regulatory coordination to head off further storms.

"What he says goes," said the U.S. bank dealer.

The Philippine peso ended up at 35.14 to the dollar against Friday's 35.42 close on gains in other regional currencies and the central bank's early interventions to sell $500,000.

Central bank governor Gabriel Singson said he would meet commercial bank presidents to discuss ways to cut bank lending rates and reduce volatility in the peso.

The Taiwan dollar ploughed new depths, ending at T$31.245 to the U.S. dollar amid widespread expectations of long-term depreciation as the central bank remained out of view.

After the market closed, the central bank cited an external index showing the Taiwan dollar had lost too much value, but vowed to let the market determine its exchange rate.

The South Korean won ended weak at 969.9 to the dollar against 964.60 on Friday despite central bank interventions.

A Bank of Korea official told Reuters on Saturday the battered won would "never, never, never" breach the psychological 1,000 to the dollar level.

"That was a dangerous statement. It immediately made the won go to 970 today: never say never," said a Singapore dealer.

The Australian dollar received a boost from a firm set of retail sales data, swinging sentiment against a rate cut. It firmed to $0.7129/34 from an early $0.7007/12.