A rebound in the US dollar touched off a wave of profit-taking in Asian currencies on Tuesday, with the high-yielding Indonesian rupiah falling as much as one percent. Analysts said that while Asian currencies may give up some of the sharp gains they have made since March, long-term appreciation remains intact as the region leads the global economic recovery.
"We expect dollar/Asians to stay bid as stocks correct and on position adjustment with market plays long Asians," said Thio Chin Loo, currency strategist at BNP Paribas. Emmanuel Ng, strategist at OCBC Bank, said Asian units, while consolidating, may be waiting for cues from major currencies.
The Indian rupee was among the day's heavy losers as central bank began withdrawing some liquidity support measures taken when the global crisis hit the economy. It left key policy rates unchanged.
The Chinese yuan eased a tad against the dollar in line with other Asian currencies, as the United States said it sought more progress on appreciation in the yuan, which has been virtually pegged to the dollar since mid-2008. China is expected to let the yuan resume its steady appreciation against the dollar early next year when its exports are likely to be rising again.
RUPIAH The high-yielding rupiah fell as much as 1 percent to 9,570 per dollar, its lowest in three weeks. Still, the rupiah is up almost 26 percent from March, underpinned by foreign investment in the country's stocks and bonds.
Three-month dollar/rupiah NDFs jumped to 9,675 from Monday's close at 9,562. CIMB strategist Suresh Ramanathan suspected offshore names were hedging their long onshore rupiah positions by buying dollar/rupiah via NDFs. "We have seen a big move in spot and probably could see further losses in rupiah spot onshore. If this happens, it's a cost for holding rupiah bonds and equities, so they need to hedge to keep the carry rather positive," he said.
PESO The peso lost 0.6 percent to 47.30 per dollar, its lowest this month, as the dollar's broad rally prompts investors to cover short dollar/peso positions. "Overnight risk aversion is pulling dollar/peso higher. The pair has breached 47.25 resistance and is poised to head higher if risk aversion gathers further momentum," said a Manila-based dealer.
In the offshore market, three-month dollar/peso NDFs rose to 47.48, implying a 0.5 percent peso fall from the spot compared to 0.6 percent on Monday. "Short covering across the board on Asians and peso follows suit," said a Singapore-based NDF trader.
RINGGIT The ringgit shed as much as 0.8 percent to 3.405 per dollar, tracking the broad weakness in Asia. "Apart from a dollar rebound, there was some dollar short-covering. Some local dollar offers were made by exporters above 3.4020 which probably came from Petronas," said a dealer at a bank in Kuala Lumpur.
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