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.