Southeast Asian currencies lifted by yen

Southeast Asian currencies lifted by yen

SINGAPORE (Dow Jones): Most Southeast Asian currencies lifted
slightly during Asian trading on Friday as the Japanese yen nosed
higher against the U.S. dollar.

The rupiah, however, ended lower, after Indonesia's supreme
military chief advised the population to stay at home, triggering
a flurry of local currency sales.

But the rupiah looks set to remain the exception among
regional currencies, according to analysts and traders.

Whereas the Indonesian currency is swayed primarily by
escalating domestic political tensions, over the coming week
markets elsewhere in Asia will move in response to changes in the
U.S. dollar/yen exchange rate and developments on the global
political stage, they say.

As trading resumes on Monday market participants' attention
will be closely focused on Kuala Lumpur, where heads of
government from Asia and the Americas, including President
Clinton are gathering to attend the Asia Pacific Economic
Cooperation forum.

Although the assembled decision-makers are widely expected to
issue a statement addressing Asia's crippling foreign debt
levels, few analysts or traders believe any announcement will
have a significant impact on regional exchange rates.

"The most we can expect is an agreement in principal to work
towards a debt deal," said Ron Leven, market strategist at J.P.
Morgan in Singapore.

But hopes that the meeting will yield a comprehensive
initiative sponsored by the U.S. and funded by Japan to
restructure Asia's foreign currency debt overhang are sadly
misplaced, he warned.

Although debt restructuring will certainly be a hot discussion
topic at the meeting, the problems are too complex to be resolved
by a stroke of President Clinton's pen, agree most observers.

With little prospect of a debt deal, and Asian economic reform
proceeding at "a snail's pace", the pivotal factor driving swings
in Asian regional currencies will remain the relative strength or
weakness of the Japanese yen against the U.S. dollar, argued Wu.

And which direction the yen and the regional currencies take
will depend more than anything on whether the U.S. Federal Open
Market Committee decides to trim another 25 basis points off U.S.
interest rates when it meets on Tuesday, said Leven at J.P.
Morgan.

A cut, which if it materializes would be the third in as many
months, would reinforce the recent rally in Asian stock markets,
further lifting the regional currencies, he argued.

Any gains are likely to be slight, with most traders and
analysts predicting a period of relative stability for the
region's currencies.

Few market participants were bold enough to make any concrete
predictions for the rupiah's exchange rate, however, as
confrontations between security forces and student protesters
again flared into violence late on Friday.

Within minutes the U.S. dollar broke up through the Rp 8,000
mark, before state banks in Jakarta stepped into the breach,
selling the U.S. currency and arresting the rupiah's fall.

Although some traders suspected central bank intervention, the
sales were more likely to have been executed on behalf of
commercial customers rather than at the behest of Bank Indonesia,
according to one Singapore-based trader at a major U.S. bank.

With many banks in Indonesia closing up early, rupiah
liquidity evaporated into the Asian afternoon. Although a handful
of Singapore-based dealers were still prepared to quote prices,
trading was sporadic and extremely light, they said.

Late in Asian hours, the U.S. dollar was being quoted at Rp
7,800, up from 7,779 at the end of the previous day's trading.

Other Asian regional currencies are likely to remain range-
bound over the coming week, unless there is an upsurge in U.S.
dollar/yen exchange rate volatility.

Against the Singapore dollar, the U.S. currency is seen
trading between S$1.6350 and S$1.6800. Although many dealers
argue that the local currency should be weaker, the U.S. dollar
is being capped by selling interest from local corporations, they
add.

Late in Asia on Friday, the U.S. currency was at S$1,6500,
down from S$1.6592 late the day before.

Against the baht, the U.S. dollar was at 36.87 baht, slightly
higher than 36.85 the day before, as traders eyed a range of
36.60 to 37.50.

On the Philippine Dealing System, the U.S. dollar closed
against the peso at 40.47, down from 40.80 the previous day.

Against the Taiwan currency, the U.S. dollar ended at
NT$32.671, compared with NT$32.681 at Wednesday's close.
Against the South Korean won, the U.S. dollar closed flat at
1,316.50 won.