Asian currencies: won and rupiah bear brunt of receding risk appetite

The South Korean won lost a further two percent against the dollar and the Indonesian rupiah tumbled on Thursday as troubles in the US financial sector depressed risk appetite. Concerns over Lehman Brothers' ability to raise capital and the broader anxiety about global growth pushed the dollar to a one-year high against the euro and weighed on high-yielders such as the Australian dollar.
The rupiah fell more than 1 percent to 9,475 per dollar, its weakest since late January. Traders said Bank Indonesia had intervened, selling dollars. "It is pretty much a risk aversion move, on the back of the US financial sector stress," J.P. Morgan analyst Yen Ping Ho said, while adding that emerging market high-yielders were feeling the stress of this drop in risk appetite. The won fell to levels close to 1,114 per dollar, hurt by foreigners' continued selling of Korean equities and despite suspected intervention by the authorities.
Before the local South Korean market opened, Vice Finance Minister Bae Kook-hwan said authorities would intervene when speculators unsettle dealings in the currency. Traders said a decision by the Bank of Korea to leave interest rates steady at 5.25 percent - a seven-year high - did not impact the won.
The Taiwan dollar was another big loser as traders positioned for the currency to under-perform against its peers after its trade account swung to a deficit and owing to foreign portfolio outflows. The Taiwan dollar weakened to a seven-month low to close beyond the key T$32 psychological barrier on Thursday, as planned cut in the stock transaction tax failed to boost market sentiment.
The Taiwan dollar fell to as low as T$32.080 to the US dollar before ending at $32.040, its weakest close since February 4. It ended at T$31.863 in the previous session. It fell nearly half a percent to a seven-month low on the weaker side of 32 per US dollar. "We remain long USD/TWD as the most straightforward long dollar in Asia," Lehman Brothers said in a note. "A break of the psychologically important 32.0 on spot will open up 32.5 in the minds of the markets."