The South Korean won and the Indonesian rupiah fell on Monday, pressured by weak trade data, leading declines among emerging Asian currencies. The won slid as offshore funds sold the currency as disappointing export growth and a slower-than-expected rise in consumer prices in March bolstered expectations of a central bank rate cut. The South Korean currency later recouped some of its initial losses on demand from exporters.
But the rupiah extended early losses as some foreign banks sold the currency and bonds after trade and consumer price indicators escalated worries about Indonesia's current account deficit and inflation. The Indonesian currency was quoted at 9,737 per dollar as, 0.2 percent weaker than the previous close. Before the data, it stood at 9,735.
Annual headline inflation in March accelerated to 5.90 percent, the highest level since May and faster than a forecast 5.51 percent in a Reuters poll. Consumer prices in February rose 5.31 percent from a year earlier. Indonesia reported another trade shortfall for February of $330 million, which was twice as large as forecast in a Reuters poll.
"The central bank's benchmark rate should not be kept at the current level if we don't want to see capital outflows," said Fadlul Imansyah, CIMB Asset Management's head of investment in Jakarta. "If BI still maintains its reference rate, there would be a negative spread between the risk-free rate and headline inflation. Then the market will eventually react negatively to that," he added, referring to Bank Indonesia.
The central bank has kept its benchmark policy rate steady at a record low of 5.75 percent since February 2012. Bank Indonesia policymakers next meet on April 11. Last year, the rupiah was the worst performing key emerging Asian currency, according to Thomson Reuters data, sliding some 6 percent on concerns over the current account deficit and inflation.
The Indonesian currency has lost 1.1 percent so far this year, though it has seen support from inflows to the country's stocks and bonds. After the latest data, some foreign banks sold bonds, traders said. "I expect the rupiah may retest the 9,750 level again," said a Jakarta-based trader, adding he predicts bond outflows. But traders said the central bank is unlikely to allow the rupiah to weaken past that level, adding state-run banks on Monday bought the currency.
The won slid on dollar demand from offshore funds to cover short positions in the greenback and as local importers purchased the US currency for payments. It later recovered some of initial losses on exporters' bids for settlements, traders said. Still, the won is likely to stay under pressure on expectations of a policy rate cut as early as next week, traders and analysts said.
They expect dollar demand linked to local companies' dividend payments to foreign shareholders. "Investors, including foreigners, may have to ponder the scenario of the won's further appreciation, given a gloomy economic picture," said Jeong My-young, Samsung Futures' research head in Seoul. "Most of all, Korea is being hit most by a weaker yen," she added.
South Korea's exports in March rose by just 0.4 percent from a year earlier, while annual inflation unexpectedly eased to a seven-month low of 1.3 percent last month. Investors also stayed cautious over intensifying geopolitical tension as South Korean President Park Geun-hye warned it will strike back quickly if the North stages any attack on its territory amid shrill rhetoric from Pyongyang and the US deployment of radar-evading fighter planes.
The Singapore dollar edged lower as the official China factory activity survey was weaker than expected, although it showed a sign that the underlying economic recovery is strong enough to weather risks from patchy export performance. China's official manufacturing purchasing managers' index (PMI) released by the National Bureau of Statistics rose to an 11-month high of 50.9 in March, above the 50-point level that indicates growth on the month, but below a Reuters poll consensus forecast of 52.0.
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