Hundreds of millions spent to shore up currencies
SOUTH-EAST Asian central banks defended their currencies yesterday against waves of selling as investors fled risky assets on deepening credit worries.
Authorities in Indonesia, Singapore, the Philippines and Malaysia sold hundreds of millions of dollars in market interventions to sustain their local currencies.
Intervention was needed in the face of the sell-off of emerging-market assets as the US sub-prime crisis worsened.
“We have been in the market and will continue to be in the market” to slow the rupiah’s rise, said Bank Indonesia governor Burhanuddin Abdullah, even as he said the currency’s level, around 9,460 rupiah to the dollar, was “OK”.
Currency dealers suspect the bank sold more than US$400 million ($615 million) yesterday through state banks as foreign investors exited Indonesian markets.
Jakarta shares plunged 7.7 per cent for the day. The central bank sold US dollars around 9,480 rupiah to keep the US currency from rising above the psychological 9,500 rupiah level, traders said. However Mr Abdullah would not discuss the size or levels of the intervention.
The Monetary Authority of Singapore (MAS) apparently bought US$200 million yesterday morning, selling the US currency from $1.53 to about $1.54, one local trader said.
Another said it appeared to be the central bank’s second day in the market. The suspected sales of the Singapore dollar are noteworthy as the MAS officially targets a moderate rise in the local currency.
The central bank uses the exchange rate, rather than interest rates, as a policy instrument because Singapore’s huge trade flows dwarf the island’s domestic economy.
Malaysia’s central bank strongly defended the ringgit through agent banks during the day, selling the dollar at RM3.496 and RM3.498 to keep it below RM3.5. It then sold at RM3.508 when the US currency popped to a five-month high, said traders in Kuala Lumpur.
The banks didn’t appear to be trying to reverse the tide of selling — only to slow the decline in their currencies. — DOW JONES
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