Stronger rupiah boosts other Asian currencies
Stronger rupiah boosts other Asian currencies
SINGAPORE (Reuters): Most Asian currencies posted robust gains on Tuesday as mounting speculation that Indonesia was on the verge of adopting a currency board system spurred hasty dollar sales.
Dealers were skeptical of the viability of such a system -- under which the rupiah would be pegged at a fixed rate to the dollar and backed by dollars equivalent to the amount of money in circulation -- but they said foreign funds were bailing out of the dollar pre-emptively.
"It seems the government wants to force in the fixed system although the market seemed to view the system as not applicable for Indonesia in its traditional form," a U.S. bank dealer said. "People are selling dollars for now while digesting the implications," she said.
Indonesian officials said the government was still studying the proposal and no decision had been taken.
The rupiah surged towards the 7,000 per dollar level in afternoon trade, a rise of more than 30 percent from late Monday levels as players worked themselves up over the proposal.
"Now the market's expecting them to announce a currency board. If they don't it's (the dollar) going to go all the way back up again," said a U.S. bank dealer in Singapore.
"If they do, initially I think the market will just wait and see what the regulations are. Is the market open to both onshore and offshore or is it like the two-tier system that Thailand just came out of?" she said.
The Malaysian ringgit rose more than nine percent, bursting through barriers at 3.80 and 3.60 to the dollar as the rupiah's rebound triggered stop-loss dollar sales in a thin market.
"Dollar/ringgit looks like it could go to 3.40. But buying of the ringgit/Singapore dollar will help dollar/Sing stabilize around 1.61-1.63," a dealer said.
The ringgit hit a two-and-a-half month high of 46.13 Singapore cents on Tuesday.
Finance Minister Anwar Ibrahim said Malaysia's current account deficit should be reasonably close to three percent in 1997 and the ringgit had strengthened, but it was still at an unsatisfactory level.
Anwar, on a visit to Tokyo, also said he discussed using the yen as a trade settlement currency and Japan's Finance Ministry was "quite positive" on the idea.
The Singapore dollar shot through 1.63 to the U.S. dollar, levels not seen since mid-December, propelling the local stock market almost four percent higher in late trade.
Dealers said the Monetary Authority of Singapore, the de facto central bank, might have bought U.S. dollars at the 1.6350 level to curb the Singapore dollar's sharp rise, but there was no sign of aggressive intervention.
They said the Singapore dollar was likely to target a key psychological barrier at 1.60 to the U.S. dollar soon.
The Thai baht shrugged off early lethargy and strengthened within a whisker of the 45.00 per dollar barrier as dollar selling against Southeast Asian currencies gathered pace.
The Philippine peso finished firmer as foreign funds sold dollars against an improved backdrop in regional markets.
Manila traders said funds were buying pesos and investing them in interest-bearing instruments and equities.
In north Asia, the Taiwan dollar finished stronger as investors took advantage of the U.S. dollar's weakness in Asia. Dealers said more gains were in store unless tensions between the United States and Iraq escalated.
The Hong Kong dollar held steady while forwards backed off in the face of the rupiah's rise.
Dealers said Hong Kong interest rates would reverse course and strengthen if political conditions worsened in Indonesia in the run-up to the March presidential election.
Only the South Korean won bucked the regional trend, ending weaker on speculative dollar buying sparked by fears of labor unrest after a militant union group rejected last week's agreement making layoffs easier.