Asian currencies seen stifled by year-end inertia
Sonali Desai
SINGAPORE, December 29: Asian currencies showed little inclination to stir on Monday as interbank activity evaporated, leaving only commercially-driven flows.Dealers said most players had squared their books for the end of the year and were reluctant to get involved in a market characterised by wide spreads and poor liquidity. "The spreads are so wide, you could pass an elephant through them," said Ishak Ismail, market intelligence analyst at IDEA in Singapore. "Interbank players are not taking any fresh positions. If they were to enter now, they could find it very expensive to get out again," he said. In South Korea, the won remained on firm footing after last week's news Seoul would receive a speedy injection of $10 billion from a $60 billion aid package put together by the International Monetary Fund. Hopes that foreign debts owed by Korean banks would berolled over boosted the won after news that major banks of Japan, the United States and Europe would meet in New York on Monday to discuss
Financial support for Seoul. The Wall Street Journal said major US lenders had agreed to roll over some existing loans to Korean banks and that Monday's talks were also expected to address the possibility of US banks underwriting a series of big new loans toSeoul. The won ended at 1,395 to the dollar, up 7 per cent fromits previous 1,498 close and dealers saw it climbing further. "There's been a consensus among banks the dollar should go below 1,200 won at year-end to reduce burden of foreign currency debt at their balance sheets," a dealer in Seoul said. The won's strength bolstered the Hong Kong dollar in morningtrade but it trickled down to 7.7493/03 to the dollar by 0905 GMT, unchanged from its Wednesday close. Hong Kong financial markets were closed for an extended Christmas break. The Taiwan dollar ended mildly higher at T$32.686 per dollar from a previous T$32.708 close. Taipei traders said the central bank might have intervened to prop up the sagging currency in the final minutes of trade,
but the market was otherwise featureless. In south-east Asia, the Philippine peso displayed little Christmas cheer after a four-day break, closing only slightly higher at 39.90 against a previous 39.970 after the central bank's dollar sales. The central bank declined to resume a pooled dollar fund programme, originally established to help meet corporate dollar requirements, but disbanded after it proved inadequate. Manila traders said the central bank bought $6.5 million at 39.70/90 pesos in early trade. It later sold dollars when the peso fell to 40.60 due to fresh corporate requirements. Interbank call loan rates shot to early highs of 45 per cent on fears of a liquidity squeeze after the long weekend. The Indonesian rupiah spiked above 5,000 to the dollar in late trade against an opening 5,000/5,200 after Bank Indonesia intervened to sell dollars at 5,300 rupiah, dealers said. Short-end swaps remained below par as dollar demand continued to outweigh supply. Dealers said volumes were thin on
the second-last trading day of the year.The market will be closed on Wednesday for book-closing and on Thursday for the New Year holiday. The Thai baht was at 46.70/95 to the dollar onshore at 0915 GMT from 47.10/45 late on Friday as commercial dollar demand dwindled and exporters sold dollars. The market appeared to ignore Prime Minister Chuan Leekpai's weekend comments that Thailand might seek an easing of conditions under its IMF-led bailout programme. Chuan was quoted by the Bangkok Post as saying Thailand may ask for an easing of some conditions, particularly the requirement of a budget surplus in fiscal 1997/98. A government minister said on Monday Thailand would not request any changes to the conditions, but it was up to the IMF to suggest changes following a review of the economy. The Singapore dollar and Malaysian ringgit languished infamiliar territory.Kuala Lumpur dealers said the ringgit was under slight pressure from importer dollar demand, but it was not expected to do much for the
rest of the week. The Singapore dollar drifted below the 1.67 mark to the dollar in subdued trade, showing little reaction to a prime rate hike by two of Singapore's `Big Four' local banks. OCBC Bank and United Overseas Bank each raised their prime rates to 7 per cent from 6.5 per cent, marking their second rate rise in amonth. The move, while somewhat earlier than expected, did not come as a surprise to the market and analysts said other banks were likely to follow suit due to the recent firmness of domestic interbank rates.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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