Indonesian rupiah rises on rate cut as Asian trade firms

The Indonesian rupiah jumped 2 percent on Wednesday, supported by foreign buying of local debt as the central bank slashed rates further, while most Asian currencies gained on improved appetite for risky assets. Bank Indonesia cut its key interest rate by 50 basis points to 8.75 percent, more than 25 basis-point cut analysts in a Reuters poll had forecast although some currency traders had predicted such a hefty cut.
The rupiah, which hit a high of 10,825 before the announcement, steadied near 10,850 per dollar. "Some foreign money is coming, they want to enter the SBI (central bank debt) market, said a trader in Jakarta. The South Korean won hit a one-week high at 1,281.9 per dollar, up almost 2.4 percent from Tuesday's domestic close, as foreigners continued to buy into local stock market.
The Philippine peso gained almost 1 percent to 46.5 per dollar, its highest since late September. "There is a big demand for the peso because of remittances from the abroad and the rise in risk appetite for foreign investors," said a trader in Manila.
The peso, which lost 13 percent in 2008, has turned around this year with a gain of about 2 percent so far this month - the most among the Asian units. The Malaysian ringgit gained a third of a percent to 3.495 per dollar. But the Singapore dollar bucked the regional trend, losing a half of a percent to 1.4768 per US dollar.
The Singapore dollar jumped more than 5 percent in December in a year-end recovery along with its regional peers, but analysts and traders remain bearish on the currency this year, given the country's worsening economic outlook. "We think this move (in December) is hard to justify given the deteriorating fundamentals," analysts at UBS said in a note.
They expect Singapore's central bank, which steers monetary policy by managing the Singapore dollar in a trade-weighted band against a basket of currencies, to let the currency weaken by re-centring its band downward in April, when it reviews policy.
"We put a very low probability of an inter-meeting policy change from the MAS (the central bank) as such moves would make defending the band a lot harder in the future," UBS said. Last week, recession-gripped Singapore cut its 2009 economic outlook to between a decline of 2 percent and a rise of 1 percent as it reported a 12.5 percent seasonally adjusted annualised contraction in the economy in the fourth quarter.