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Rupiah's new low drags down other regional currencies

 

SOUTHEAST Asian currencies yesterday continued to take big hits from massive selling, which has sent values against the US dollar down by between 7.69 per cent for the Singapore dollar and 58.92 per cent for the Indonesia rupiah since June.

The rupiah plunged to a new low of Rp3,685 to the US dollar yesterday, dragging neighbouring currencies down across the board. In June, right before the baht crisis triggered by its flotation on July 2, the rupiah was trading at an average Rp2,432 to the US dollar.

The rupiah devaluation of 58.92 per cent is now steeper than the baht's, which was traded at Bt36.37 against the US dollar yesterday. The baht has lost about 47 per cent of its value since June when it averaged Bt24.70 against the greenback.

A sharp depreciation of the rupiah yesterday forced the Indonesian central bank to intervene and sell dollars for the first time in weeks, propping up its currency to record around Rp3,700 to the greenback in the afternoon trading session.

The unexpected intervention gave the rupiah some respite, but dealers said its prospects remain grim, with it headed for Rp4,000 to the dollar as Indonesian companies grapple with huge foreign debts.

Partly hurt by a concerted decline of regional currencies, the baht took a further nosedive to Bt36.80 to Bt37.20 to the greenback in local spot trading from Bt36.45 at the close of trading on Friday. The offshore baht also dropped significantly to Bt36.30 to Bt36.45, compared with Bt35.55 to Bt35.75 on Friday.

The Singapore dollar crashed to a 40-month low against the greenback hurt by spill-over effects from the poor market sentiment hitting the other Southeast Asian currencies. The Singapore unit declined to S$1.5486 against the US dollar a level last seen in June 1994 from Friday's close of S$1.5425.

The Malaysian ringgit weakened to M$3.3880 against the greenback, compared with M$3.3620 in early trading. Since June, the ringgit, which averaged M$2.52 against the dollar then, has shed about 34 per cent of its value.

The Philippine peso was down to P34.926 to the dollar from P34.910 on Friday. The peso has seen a devaluation of around 32.30 per cent against the greenback since June, when it was trading at 26.38 pesos/dollar.

''The focus continues to be on the rupiah and the Malaysian ringgit although all the regional units are down," said Ishak Ismail, market analyst with London-based IDEA.

A dealer from Banque Indosuez based in Bangkok said the rupiah has become a rising dead star in the region, sending ripple effects throughout the region. In addition, the dollar/baht trading is likely to remain inactive since most currency investors are also sidelined ahead of Thailand's awaited financial reform package scheduled to be released on Oct 15.

Dealers said the rupiah's weakness is attributable to market fears that large Indonesian corporations could not settle massive loans denominated in the US dollar, which had risen rapidly against most regional units.

''Based on the negative reports we are receiving, it will not be a surprise if the Malaysian and Indonesian currencies hit the four levels [Rp4,000 and M$4.0000 per US dollar] soon," a dealer with a European house said.

A US bank dealer in Singapore said rumours are mounting that Indonesian companies with large dollar call options were going to default on their positions.

''Many of them have written dollar calls and they're not professional option traders. So they've left them unhedged," she said.

Along with the rupiah, the Malaysian ringgit succumbed to fresh selling as players quickly shrugged off news of a large trade surplus in August and looked for excuses to buy the dollar again.

 

BY JIRAPREEYA KEAWKUMNURDPONG and THANONG KHANTHONG

 

 

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