The South Korea won and Indonesian rupiah led Asian currencies higher on Wednesday after economic data raised hopes that unprecedented world-wide efforts to tackle the global slowdown may finally find traction. The won gained just over 1 percent to 1,369.8 per dollar, finding additional support from the US Federal Reserve's extension of a currency swap agreement.
The rupiah rose 1 percent to 11,625 per dollar, as the central bank cut interest rates by 50 basis points to spur growth amid the global downturn. Some foreign money flowed in ahead of the central bank's auction of debt later in the day, traders said. Bank Indonesia aims to raise 54.3 trillion rupiah ($4.66 billion).
However, the outlook remain bearish, analysts said. The rupiah in three-month offshore NDFs jumped to 11,990 per dollar, implying a fall of nearly 3 percent from the spot rate. Enrico Tanuwidjaja, currency strategist at OCBC Bank, expected the rupiah to fall to 11,950 by the end-June, 12,600 by end-September, before stabilising near 12,000 by the year-end.
"We still see risks of the rupiah being battered further by heightened risk aversion and threats of further de-leveraging," he said in a note. The Malaysian ringgit rose a fifth of a percent to 3.608 per dollar and gained 0.7 percent in three-month non-deliverable forwards to 3.6145.
"Overnight optimism on US stimulus plans could lead dollar/Asia lower, including dollar/ringgit," said a trader in Kuala Lumpur. The three-month NDFs now imply a 0.2 percent fall in the ringgit, far less than the 2.6 percent drop they implied in early December.
Meanwhile, Kazakhstan's central bank on Wednesday radically widened the tenge's corridor as it allowed the currency to drop 15 percent from Tuesday. It said it intended to allow the currency to trade around 150 per dollar, a move seen as trying to keep the currency competitive with Russia's rouble, which has lost about a quarter of its value since October.
"It had been hinted overnight but is definitely bad news for the euro and could produce broader dollar safe haven buying," said Sean Callow, currency strategist at Westpac. Optimism the US housing market - at the centre of the worst financial crisis since the Great Depression - may be close to reaching a bottom also helped after data showed a surge in pending sales of previously owned US homes in December.
Still, David Mann, strategist at Standard Chartered Bank, said Asian currencies would face pressure in coming months, with the ringgit, the Singapore dollar and Taiwan dollar particularly vulnerable because of their reliance on exports.
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