Southeast Asian currencies slide as market mood sours

Southeast Asian currencies slide as market mood sours

SINGAPORE (Reuters): Southeast Asian currencies slid yesterday as market sentiment turned sour in the build-up to the Malaysian budget and Indonesia's IMF-led aid package.

The gloom spread to stock markets as prospects of the ringgit, rupiah, baht and peso pulling out of the slump appeared to recede yet further.

The Indonesian central bank intervened sporadically to prop up its rupiah from an early low of 3,660 to the dollar, helping it stabilize temporarily.

But the currency failed to stage a convincing recovery and slid further to 3,670/80 by 0945 GMT, more than two percent down from its 3,565/75 levels late on Wednesday.

"The central bank came in regularly with small amounts of dollars, trying to limit the fall. But we see sustained dollar buying from domestic and offshore players," one dealer said.

Uncertainty about the nature and amount of assistance the International Monetary Fund (IMF) would arrange for Indonesia and fears of corporate debt defaults weighed on the rupiah.

An IMF team arrived in Indonesia at the weekend, but there has been no official estimate of how much it will lend to Indonesia and on what terms.

IMF First Deputy Managing Director Stanley Fischer said on Wednesday a deal could be in place within two weeks. The IMF was likely to agree with Jakarta that financial sector, trade and distribution sector reforms would be key elements, he said.

The Malaysian ringgit touched a low of 3.1950 to the dollar against its late Wednesday levels of 3.1550/650 as optimism about the budget evaporated a day before its release.

"I doubt there'll be any big positive surprises in the budget. And the problem is always how they're going to implement any changes and whether they really will," said a senior European bank dealer in Singapore.

The ringgit was at 3.1770/870 to the dollar at 0945 GMT. Most dealers said Malaysian Prime Minister Mahathir Mohamad's speech at the opening of a regional economic ministers meeting in Kuala Lumpur had little impact on the market.

Careful

Mahathir called on them to liberalize trade carefully and stressed the need for distinguishing between short-term speculative inflows and serious investments.

But some attributed the ringgit's decline to the mere fact that Mahathir -- whose recent calls for curbs on forex trading have terrified markets -- had spoken.

"Whenever he speaks now, people get worried and buy dollar/ringgit. It doesn't really matter what he says," the European bank dealer said.

The Singapore dollar hovered within reach of the 1.55 level to the U.S. dollar for most of the day with interest focused on the ringgit/Singapore dollar cross.

The Thai baht fell further to 36.63/73 to the dollar onshore from 36.45/65 late on Wednesday.

Unhappiness with Bangkok's financial reform package, coupled with speculation it would lift the two-tier baht system, kept the offshore rate even more depressed.

It was at 37.00/10 against 36.60/90 even after central bank governor Chaiyawat Wibulswasdi denied the speculation.

Offshore pessimism appeared to be borne out by the central bank's announcement that Thailand's gross domestic product would grow at a rate above 1.0 percent in 1997, below its earlier forecast of 2.5 percent.

The Philippine peso ended steady at 33.75 to the dollar as banks held back dollar purchases due to restrictions on holding long dollar positions.

The market shrugged off the central bank's early sale of dollars at 33.75 pesos and the peso only recovered from a low of 34.30 because demand for dollars from companies and banks fell.

The Taiwan dollar closed lower at T$28.550 after recovering from an unexpected afternoon drop, which fueled speculation the central bank might be relaxing its defense of its currency.

But it said after the market closed the Taiwan dollar was undervalued and vowed to continue defending it. The central bank also ordered another cut in commercial bank reserve requirements to bolster money market liquidity, a move seen as aimed at restoring the sagging stock market.

Taipei shares crumbled through the psychological 8,000 support on Thursday, ending 3.2 percent lower at 7,997.81.