The currency blight spread to Australia and New Zealand and gold prices briefly dipped to a new 18-year low on worries about weak Asian economies and
deflation.
Foreign exchange dealers said short-covering lifted some currencies like the Malaysian ringgit and Singapore dollar off their early lows, but the general undertone for regional currencies remained weak.
”The move down has been too swift and sharp. But there will be buying of dollars on any dips,” said a dealer with an American bank.
”Local corporates are still looking to buy dollars for their own exposure,” he added.
Dealers said concern over Malaysia’s short-term debt and nervousness over a budget speech by Indonesian President Suharto later in the day, as well as the cloud of gloom that descended on regional economic prospects, spurred dollar buying.
The dollar also strengthened against the Japanese yen, rising to a high of 134.38 yen in early trade, its highest level since April 1992, prompting the Bank of Japan to intervene.
”American funds have been pretty aggressive in buying dollars across the board.
”It is hard tell which currency is leading in this latest round of falls, whether it’s the ringgit or the rupiah,” said a currency dealer at a European bank.
”The Asian currency crisis is turning into an Asian debt crisis,” said a dealer at an American investment bank.
He said new figures from the Bank of International Settlement showing Malaysia’s short-term debt at 56% of total borrowings from overseas banks, higher than a general 30% estimate, spooked the market.
”It shows that people do not have a handle on the situation,” he said.
The Malaysian ringgit settled at 4.3450 after hovering between 4.1800 and 4.3400 throughout the day. Late on Monday it was at 4.0550.
Malaysian shares were caught up in the battering, the key share index slumping 3.85%, or 21.05 points, to end at 525.74.
The Indonesian rupiah hit a record low of 7700 against the dollar in early trading, but short-covering brought it back up to its opening level of 7000 in the late afternoon.
”The market is very thin and there is a lot buying of dollars by local corporates in Jakarta to cover their dollar exposure,” an American trader said.
Dealers said the rupiah remained weak on fears that the government lacked the political will to meet the tough conditions imposed by the International Monetary Fund for a $40bn loan package.
The IMF targets include a budget surplus of 1% of gross domestic product for the financial year beginning April 1, 1998.
Dealers said they expected dollar/rupiah to reach 8000 in the short term and perhaps 10,000 over the next six months.
The Singapore dollar fell in sympathy with its two closest neighbours.
The Sing touched a low of 1.7420 after opening at 1.7200. It was hovering between 1.7345 and 1.7385 in late afternoon.
Dealers said there was good two-way interest in the dollar/Sing with US fund buying met by local bank selling. ”I think the next target could be 1.80 for the dollar/Sing, especially with the other regionals heading much lower,” one dealer said.
The weak Singapore dollar pulled the country’s shares lower, with the key share index shedding 3.80%, or 56.83 points, to end at 1439.12.
”We are advising our clients to stay away. We are not even saying this is a right time to go in to search for good buys. Not in this market,” said one share dealer.
The Thai baht plunged to a new low of 52 to the dollar after Bangkok said it wanted to review the IMF terms for its $17bn aid package.
The Philippine peso also fizzed downwards, breaching its third volatility band of 45.209 to the dollar in the afternoon, freezing all trades for the rest of the day.
The Bankers’ Association of the Philippines said it would maintain the volatility band at a maximum of 6% until further notice.
The Taiwan dollar touched a 10-year low of $33.999 against the US dollar in early trade and recovered to close at T$33.755, but still more than half-a-Taiwan dollar below Monday’s close of T$33.226.
Dealers said the local currency was suffering from fears of it testing the T$35 level as dollar demand continues to grow.
The Australian dollar toppled to 11-year lows as investors scrabbled for US dollars.
It was at $0.6375-70 in late trade yesterday, from $0.6481-86 late Monday. – Reuters.
