Singapore, Mar 9: Asian currencies made a shaky start to the week because of growing tension between Indonesia and the International Monetary Fund and confusing policy signals out of Jakarta.Indonesia's troubles depressed currency and stock markets across Asia as traders fretted about the possible repercussions of the IMF pulling out of Indonesia in the face of the government's persistent failure to meet prescribed economic reforms.
President Suharto on Sunday questioned the suitability of the reforms, tied to Indonesia's $40-billion IMF-lead bailout package, throwing up differences between the fund and the crisis-ridden country.
The IMF said on Friday its board would not discuss Indonesia's reform programme before April, effectively delaying the fund's next disbursement of $3 billion, which was due this month.The IMF's country representative in Jakarta, Kadhim Al-Eyd, said on Monday the fund was continuing its reform review talks with the government and hoped they would be concluded soon after a newcabinet is in place following Suharto's re-election on Tuesday.
The rupiah pulled back from its early lows of around 12,000 to the dollar, but dealers said trade was very thin and spreads wide because most traders opted to stay away from the currency.
Continuing talk that Jakarta might soon resort to a fixed-rate system to stabilise its rupiah plagued the market and an announcement by the Association of Indonesian Private Banks that interest rates would be lowered this week only added to the confusion.
Bambang Trihatmodjo, one of Suharto's sons, said Indonesia planned to go ahead with IMF reforms, but added that the government would announce a fixed rate for the rupiah soon after the swearing-in of his father for a seventh five-year term on Wednesday.
"They're trying to mix fire and water. Maybe if they sway more towards the IMF reforms and just a bit on a currency board, it will work. But I don't think either side will be happy with that," a regional currency dealer in Singapore said.Elsewhere insoutheast Asia, the Malaysian ringgit remained weak but off its lows after diving through four to the dollar in early trade.
Dealers said the ringgit should find support from dollar sales near the 4.10 level for the time being, but they added that the dollar looked well bid at 4.00.Morgan Stanley Dean Witter said it expected the ringgit to fall to five per dollar by the end of 1998 because of money growth and an increase in bank non-performing loans.
The ringgit has been troubled by fears about the health of Malaysia's financial sector since the central bank announced last week that four institutions needed fresh injections of capital to restore them.The Thai baht held up relatively well as the market looked favourably at Thailand's efforts to abide by IMF reforms.
Criticism of the central bank for its handling of the financial crisis had little impact on the baht because it came as no surprise to the market, dealers said.Thai finance minister Tarrin Nimmanahaeminda said investors and credit ratingagencies could differentiate between the problems faced by Thailand and Indonesia.
"I believe credit rating agencies can differentiate markets even though regional currencies have retreated sharply," he told reporters amid concerns the baht could be hurt by contagion from the rupiah.
Weaker regional currencies also hurt the Philippine peso but traders said its fall would be limited to 40.50 per dollar because of a lack of corporate dollar demand.
In North Asia, the Taiwan dollar was depressed by the region and news of a rare trade deficit for February, which was seen as increasing depreciation pressures on the domestic currency.
The finance ministry said Taiwan had a trade deficit of US$610 million in February after a surge in imports, compared with a surplus of US$203 million in February 1997.The South Korean won strengthened as foreign investors turned net buyers of Seoul stocks after Friday's sell-off.
Traders said the won was relatively impervious to the Indonesia effect and a Moody's InvestorsService announcement that Korea's country ceiling for long-term foreign currency bonds and notes remained on review for possible downgrade.
