Southeast Asian currencies rally on IMF-Thailand deal

Southeast Asian currencies rally on IMF-Thailand deal

SINGAPORE (AFP): Southeast Asian currencies rallied yesterday
on news of an imminent multi-billion-dollar rescue plan for
Thailand and Malaysia's imposition of capital curbs to shore up
the ringgit, dealers said.

The Thai baht closed offshore at around 31.67 to the dollar,
compared to its closing rate of 31.90 last Friday.

"The baht is stronger compared to Friday thanks to the IMF
package," Alison Seng, an analyst with investment house MMS
International, said of reports that a rescue deal with the IMF
and Japan was in the bag.

"Supposedly most of the terms were agreed upon, even though
the details will only be out later today or tomorrow. The market
views it as a pretty favorable event," she said.

The Malaysian ringgit closed at around 2.6135 to the dollar,
up from Friday's close of 2.6285 but off Monday's high of 2.5800
right after the central Bank Negara limited access by foreign
parties to ringgit.

"The market is now waiting for the Malaysian trade numbers. We
heard it is coming out on Thursday and it is not going to be a
favorable one," Seng added.

The Indonesian rupiah also closed firmer at 2,597 to the
dollar, from 2, 607 last Friday, while the Singapore dollar ended
at 1.4667, up from 1.4695 Friday.

Regional currencies have been under pressure since the Thai
baht's de facto devaluation on July 2, and analysts say the baht
will be dictating the market's direction over the short term.

The major Japanese economic daily Nihon Keizai Shimbun has
reported that the IMF and the Export-Import Bank of Japan would
jointly provide about US$8 billion in emergency loans to
Thailand.

Major commercial banks would also lend their support to
Thailand, it said.

Analysts said that in exchange for the bailout, Thailand is
expected to be told to impose austerity measures and instill
fiscal and monetary discipline, which would lead to a further
slowdown of the economy while it consolidates.

The broad IMF plan is to be submitted to the Thai cabinet
Tuesday.

"Presumably if everything has been worked out fine, then we
would see the baht trading within the 30-to-33 range," said Seng
of MMS International, a division of US credit rating agency
Standard and Poor's.

"The initial reaction will be kind of near the 30 level," she
said, but added that "after a while, people will be expecting
more measures not just from the IMF but from the government to
carry out the IMF prescriptions."

Seng added that the market would focus on what the rating
agencies have to say on Thai sovereign debt after the IMF deal.

Jacqueline Ong of British financial house I.D.E.A. said that
when the IMF measures are in place, "I think we can expect a
short-term bearishness over the economy.

"The baht will be choppy. That is almost certain," she said.
"Ultimately people will still be searching for the true value of
the baht according to economic fundamentals."

Ong added: "We are likely to see a period of choppy trading
until the Thai economy can actually stabilize." The initial
period would be "a little bit painful," she said.

Malaysia's central bank on Monday implemented new regulations
limiting non-commercial swaps to $2 million per foreign customer.
Swaps allow a company to exchange the currency it holds for
another it needs.

Ong of I.D.E.A. said that this would have some impact since
the average size of swaps was $10 million, but effects would be
eased by the fact that many offshore parties now hold plenty of
ringgit.

"They are armed in one sense," she said. "They are not
squeezed. The impact is really lessened."

In June 1992, the central bank had used a similar order to
discourage inflows of speculative funds.

Deputy Prime Minister Anwar Ibrahim, who is also finance
minister, told reporters Monday there would be no new measures
introduced by Bank Negara for the moment aimed at curbing
speculation on the ringgit.

Analysts in Kuala Lumpur said Bank Negara injected close to
one billion ringgit ($400 million) into the money market Monday
to ease interest rates after the swap restrictions resulted in a
ringgit shortage, which drove rates up and sent stocks lower.