Hopes rose throughout south-east Asia yesterday that its six-month-old financial crisis had bottomed out, though analysts warned that a rebound in shares and currencies in the last two days could be a technical adjustment and that the markets remained weak and volatile.

Share prices rose sharply in Jakarta, Hong Kong and Singapore as confidence returned in some measure following upbeat remarks by International Monetary Fund managing director, Mr Michel Camdessus, that the IMF was on the verge of announcing a "very solid agreement" with Indonesia on economic reforms.

In Hong Kong, jitters about a possible break in the peg between the Hong Kong dollar and the US dollar - which chief executive, Mr Tung Chee-hwa said was vital to avoid "chaos" - subsided when US Deputy Treasury Secretary, Mr Lawrence Summers said the former British colony could successfully defend its currency against speculative attacks.

"The Hong Kong authorities have the capacity, the determination and the skill needed to carry out their declared policy with regard to the exchange rate," he told reporters after meeting Mr Tung in Hong Kong.

He will travel on to Beijing today as part of a tour of Asia by US and IMF officials to restore confidence in the region.

Mr Camdessus, who said the immediate priority of his visit to Indonesia was "to arrest and turn around the tremendous loss of confidence, and stabilise the market through monetary discipline and a dramatic acceleration of long overdue structural reforms", is due to announce a new agreement today after meeting President Suharto.

This was the culmination of an international effort to bring Indonesia back from the brink after the meltdown of its stock market and currencies last week when it became known the IMF believed it was reneging on reforms promised in return for the $43 billion (£31.3 billion) IMF rescue package put together in October.

Mr Camdessus said: "I am very hopeful that I will be able to announce a very solid agreement" on new commitments by Indonesia to cut public spending.

This would take the form of a letter of intent, which is expected to rewrite last week's much-criticised Indonesian budget.

He also said the precipitous fall in the Indonesian rupiah had been "overdone in an extraordinary proportion", remarks borne out by a rapid strengthening of the currency yesterday to 7,500 against the dollar from 8,300, after hitting an all-time low of about 11,000 to the dollar last week.

Apart from visits by Mr Summers and Mr Camdessus, several regional leaders have either travelled to Jakarta or telephoned President Suharto to urge him to take resolute measures to restore credibility after he had been accused of favouring companies in which his three sons and three daughters had major shares.

US Defence Secretary, Mr William Cohen also travelled to Jakarta and said, after meeting the president, that he appeared determined to put his country on a sound footing and restore confidence in the integrity of the its financial system.

Amid mounting criticism of the ruthlessness of the IMF in imposing conditions of tight budgets, high interest rates and bank closures in return for rescue packages, a leaked internal IMF memo admits to a key misjudgment which played a role in Asia's panic.

It said that the IMF forced the closure of 16 insolvent banks in Indonesia to restore confidence in the remainder of the banking system by removing the bad apples, but that instead it touched off a panic. Indonesians rushed to take $2 billion out of all banks, forcing the central bank to pump back funds equivalent to 5 per cent of GDP.

The report, published in the US media, also assails Jakarta for bad faith. Mr Camdessus said he knew nothing about the memo.

Harvard economist, Mr Jeffrey Sachs said yesterday in Singapore that the IMF had worsened the crisis by triggering a banking sector collapse in Thailand, Indonesia and Korea. "The banks in these three countries can no longer open letters of credit with international banks," he told students.

Foreign banks which rushed to lend money to Indonesian companies before the crisis may have to bear losses of $65.6 billion in Indonesian corporate debt, much of it owed by enterprises which have gone under.

Hong Kong's financial secretary, Mr Donald Tsang, said yesterday on BBC he believed the worst was over and that "we are in the tail-end of the turmoil in Asia here - I think it has done the full round".