Se Asian Currencies Unexcited By Thai Package

Sleepy Southeast Asian currencies opened one eye and peered blearily at Thailands eagerly awaited economic package on Tuesday, but were apparently unimpressed.

Dealers and analysts said the Thai governments announcement of a series of tough measures, recommended by the International Monetary Fund (IMF), held few surprises but was viewed as positive for the Thai economy in the long run.

Thai Finance Minister Thanong Bidaya said the government had approved measures aimed at maintaining $25 billion in foreign reserves, cutting the current account deficit, controlling inflation and raising the value added tax.

Thailand hopes to obtain $12-$15 billion in loans from foreign countries and the IMF by implementing these measures and suspending operations of another 42 cash-strapped finance firms.

 

The baht firmed in initial reaction to the news but was soon trading back near its earlier levels and dealers said further gains would be limited.

The baht was at 31.70/32.00 to the dollar onshore at 0935 GMT and 31.31/46 offshore.

I think weve seen it (the bahts rebound) as of today and the baht is going to remain weak going into Europe and the U.S., a treasury manager at a U.S. bank said.

Some people think that over time, the government might find the IMF very restrictive and things might deteriorate. But for now Thailand has no choice but to agree to what theyre asking.

Chan Chia Lin, head of economic research at ABN-Amro Bank, said the baht was unlikely to appreciate significantly as Thailands economic rescue plan, though positive in the long term, would bring short-term pain.

But for now, the fear of dollar/baht reaching 35 has probably subsided somewhat, Chan said. The Thai stock market plunged on news of the suspensions of more finance companies. The benchmark SET index fell 4.28 percent to 635.44 points at 0745 GMT. It recovered slightly to close at 648.47.

Elsewhere, the Malaysian ringgit remained weak after sliding overnight in thin London markets following the release of an unexpectedly large trade deficit for June.

The ringgit was at 2.6340/70 to the dollar at 0935 GMT against 2.6325/55 earlier and 2.6120/50 late on Monday.

Malaysia reported a trade deficit of 2.8 billion ringgit for June late on Monday following a surplus of 156.2 million in May.

Dealers said the ringgits fall was cushioned by the fact that imports of bulky items like ships and planes contributed heavily to the deficit.

Dollar selling offers around the 2.6370 ringgit level from Kuala Lumpur banks also limited the ringgits decline.

The ringgit surged to 2.5800 to the dollar in early Monday trade after Bank Negara said local banks would have to limit their non-trade related currency swaps to $2.0 million with each overseas customer.

The Indonesian rupiah remained firm around 2,595/605 to the dollar, little changed from morning levels amid tight money market liquidity, dealers said.

The Philippine peso closed slightly weaker at 28.650 to the dollar against 28.60 on Monday.

Manila traders said the dollar remained in demand with corporate clients but its gains were tempered when the central bank sold dollars around the 28.85 level earlier in the day.

One trader said the central bank had sold an estimated $10.5 million of the $25 million traded on Tuesday.

The Taiwan dollar finished firmer as soaring money market rates triggered profit-taking on the U.S. dollars recent sharp rise, dealers said.

Taiwans overnight interbank rate rose to 7.776 percent late on Tuesday from 7.499 percent on Monday and 6.277 percent on Saturday. The Taiwan dollar ended at T$28.625 against Mondays T$28.654 close.