The Indonesian rupiah took a fresh hit on Monday as investors cut riskier assets amid the turmoil in credit markets, but the resilience in the Philippine peso raised optimism that the currency could weather the storm.
The high-yielding rupiah steadied near 9,305 per dollar, down almost 0.4 percent from late Asia trade on Friday, after hitting a 13-month low of 9,355. Traders said foreign investors had rushed to sell Indonesia's stocks in a bid to curb losses as risk aversion rose, promoting the central bank to buy the local unit to limit its falls.
"The central bank's intention is to slow down the volatility," said a trader in Jakarta. The rupiah has fallen 3.4 percent versus the dollar so far this year, making it the worst performing currency in the region, as the country's successive interest rate cuts in recent months dented its yield advantage.
But deputy central bank governor Aslim Tadjuddin said on Monday that the weakening in the rupiah would be temporary. "Regarding the weakening of the rupiah, the important thing is that it is not because of domestic factors since our economic fundamentals are very strong. I am confident that it will tend to strengthen to reflect the economic fundamentals," he said.
Tadjuddin also said that the central bank would focus more on domestic factors when deciding interest rates, although external issues would also be taken into account. The Bank of Indonesia is expected to hold its main one-month policy rate steady at a meeting on Tuesday, pausing after its 13th rate cut in 14 months, a Reuters poll showed.
"Going forward, the authorities are likely to be even more cautious on further interest rate cuts, particularly given the continued rise in oil prices," Perry Kojodjojo, currency strategist at HSBC, said in a research note.
Traders said Malaysia's central bank had also been suspected of buying the ringgit to prevent it from falling sharply. The ringgit fell as far as 3.475 per dollar.
Fresh buying interest helped the high-yielding peso rebound to about 45.45 per dollar, which matched Friday's close, after dropping as far as 45.80 per dollar in early trade.
A trader in Manila said investors' sentiment was boosted in late trade after the dollar failed to break the 45.8 level. Thio Chin Loo, currency strategist at BNP Paribas, said she belived the peso would be supported by the country's solid economic fundamentals - trade surpluses and capital inflows.
"We like to sell dollar/peso near 46 as the Philippines' fundamentals are still positive," she said. The Japanese yen hit a two-month high versus the high-yielding New Zealand dollar and rose to a four-month peak against the US dollar as investors unwound carry trades.
MSCI's measure of Asia Pacific stocks excluding Japan lost 2.4 percent following a slide in US stocks late last week after Bear Stearns said credit markets were in their worst shape in two decades.
But the Chinese yuan defied the region's broad weakness, hitting 7.5563 per dollar, its highest since the currency set a post-revaluation high of 7.5543 on July 25. Most analysts believe the volatility that has overshadowed emerging Asian currencies in recent weeks will persist amid worries about the fallout from the US subprime mortgage market.
Comments
Comments are closed.