Asian high-yield currencies rise

Asian high-yield currencies rallied on Friday as risk appetite improved and stocks rose on a US plan to slow home loan foreclosures to try to cushion the economy from a housing downturn.
But while the Malaysian ringgit, South Korean won and Philippine peso managed to rise about a quarter of a percent each, the Indonesian rupiah was undermined by Thursday's unexpected rate cut by the central bank.
The peso hit a fresh 7-1/2-year high of 41.71 per dollar, underpinned by money transfers home from Filipinos working overseas, which are traditionally strong at the end of the year.
The won hit a three-week high of 918.3 per dollar, rising 0.3 percent as foreigners turned net buyers of Korean stocks for a second consecutive day and after the Bank of Korea left interest rates on hold for a fourth month. But as the dollar edged up against the euro and yen, analysts were wary of upcoming data and events that could force it to retreat again.
Market participants were anticipating a strong US government non-farm payrolls report on Friday after data earlier this week showed healthy private sector hiring. Most of them have also priced in an easing of at least 25 basis points by the Federal Reserve on December 11.
"The Fed meeting is a non-event. Key is the statement and where the balance of risks lie," said Thio Chin Loo, a currency strategist at BNP Paribas. Thio said there was still a lot of scepticism over the White House plan to help borrowers by freezing loans on certain subprime loans. "It may provide some relief but the details are important. It is not clear yet," she said.
The rupiah bucked the broad rally as it fell 0.2 percent to 9,270 per dollar, coming further off Thursday's three-week peak of 9,230. Bank Indonesia on Thursday cut Indonesia's one-month policy rate by 25 basis points to 8 percent, to the surprise of many economists, who believed rates had already been cut too far and inflationary pressures were building.
"It is hurting the rupiah temporarily but in the medium term it is good for the rupiah," said Pino Hadi, chief dealer at Bank Mandiri in Jakarta. "The banking industry will have lowered interest rates for credit purposes and stocks in Jakarta should rise today. That is good for the rupiah," Hadi said. But analysts at J.P. Morgan said the rupiah might suffer eventually if the consumer price index (CPI) climbed under pressure from high oil prices.
"Our view is that this could open further rupiah risks in the medium term as inflationary inertia remains sufficient to keep CPI above its 4-6 percent inflation target range in the first half (of 2008)," J.P. Morgan said in a note. "For now, the market will give Bank Indonesia the benefit of the doubt and treat the rate cut as an opportunistic decision ahead of the US Fed's rate cut next week that will leave the respective policy differentials unchanged."