S'pore dollar, rupiah lead currency slide

S'pore dollar, rupiah lead currency slide

HONG KONG (Dow Jones): Falls in the Singapore dollar and the
Indonesian rupiah dragged other Southeast Asian currencies lower
Wednesday. North Asian currencies were unaffected, with the
Korean won closing flat on the day, and the New Taiwan dollar
edging higher.

The weakness of the Singapore dollar over recent sessions has
taken many market participants by surprise. Both corporate and
institutional customers loaded up on the Singapore currency ahead
of the New Year in anticipation of strong appreciation this year.

Further local currency buying was seen last week from market
players encouraged by a Standard Chartered Bank research report
forecasting a 10% strengthening in 2000, with the U.S. dollar
seen falling to end the year at S$1.5000.

But a rally in the U.S. dollar against the yen and what
traders describe as aggressive buying of the U.S. dollar by the
Monetary Authority of Singapore has clouded that picture in the
short term.

As the U.S. dollar has risen through successive trigger
levels, customers have scaled down their hedges and cut back long
positions in the Singapore currency, driving the U.S. dollar
higher still.

Wednesday morning the U.S. currency was propelled as high as
S$1.6908 against the Singapore dollar, its highest level since
early October.

By the end of Asian trading, the U.S. dollar had eased a
little from its earlier peak, but at S$1.6892, the U.S. currency
remained well above levels of S$1.6845 seen late the day before.

Although traders believe the Singapore dollar is undervalued
at current levels, some warned that the local currency could
weaken further to S$1.70 to the U.S. dollar in the short term.

"I certainly wouldn't dare go long the (U.S.) dollar at
S$1.69, it would be fundamentally wrong, but if fund managers'
confidence is shaken any further, we may see more short
covering," said the head of regional currencies at one U.S. bank
in Singapore.

Another trading chief said that, left to itself, the U.S.
dollar is unlikely to extend its gains beyond S$1.6930, but added
that further buying from the Monetary Authority of Singapore
could push it higher still.

"We expected the MAS to support the U.S. dollar, but not at
these levels," he said.

The Indonesian rupiah also weakened Wednesday as violence
flared afresh in Aceh, despite a visit from Indonesian President
Abdurrahman Wahid intended to soothe tensions in the troubled
north Sumatran province.

Dealers were also unnerved by reports that the president had
sacked eight senior generals, including General Wiranto, the
senior security minister, from their military posts in an attempt
to weaken the army's grip on Indonesian politics.

"Because of all this political uncertainty, people are
reluctant to sell dollars (against the rupiah) as an economic
recovery play," one trader said.

The market's jitters pushed the dollar as high as 7,380 rupiah
in intraday trading. Late in Asia, the U.S. currency was quoted
at Rp 7,375, up from Rp 7,320 late Tuesday.

Both the Thai baht and the Philippine peso followed the
Singapore dollar and the rupiah lower Wednesday.

Against the baht, the U.S. dollar ended trading at 37.315
baht, up from 37.265 baht the previous day.

Against the Philippine peso the U.S. dollar closed at 40.495
peso, up from 40.445 peso the day before.

In North Asia, the dollar closed flat against the South Korean
won, ending the session at 1,127.20 won compared with 1,127.10
won Tuesday.

Against the New Taiwan dollar, the U.S. currency ended at
NT$30.794, down from NT$30.813 the previous day, on fund inflows
attributed primarily to foreign portfolio investors.