The Indonesian rupiah climbed to a three-month high on Monday, lifted by results from last weeks parliamentary elections showing the presidents party won the most votes. Meanwhile, the Thai baht fell in offshore trades, revealing investor worries over the escalating political tensions in the country even as onshore markets remained closed on the first of a 3-day festival holiday.
Trading remained thin because of holidays in Hong Kong, Australia and elsewhere in Asia. The rupiah rose more than 2 percent to levels around 11,070 per dollar, climbing alongside the main stock market after President Susilo Bambang Yudhoyonos Democrat Party nearly tripled its share of votes in parliament to 20.5 percent.
"It seems like there are a lot of (dollar) sellers today," a trader in Jakarta said. Bank Indonesia had not intervened to cap the rupiah yet, he said. The rupiahs gains come in the face of weakness in other currencies around the region where authorities are either encouraging or tolerating depreciations as a means to offset crumbling export revenues.
Those gains could also prove short-lived, given the Democrat Party still needs a coalition partner ahead of presidential elections in July and that raises doubts over how far Yudhoyono can push for reforms of the judiciary, civil service and other areas considered critical to attract foreign investment.
"The big question is we to see a euphoria rally or just a flash in the pan," said Suresh Kumar Ramanathan, rates and currency strategist at CIMB Investment Bank. Ramanathan said the rupiah could retreat back towards 12,000 a dollar if risk aversion persisted.
"In the last five years since 2004, Bambang has been seen more of a moderate, and pretty positive for the rupiah from a foreigners perspective. "But, barring the election results, lets see what changes are made on the financial and trade front and whether there are any changes in his cabinet - issues that are being focused on by the market," he said.
Meanwhile, in Thailand, as anti-government protests gathered momentum and the army began its crackdown, the baht reacted in offshore markets, falling as much as 0.7 percent to 35.60 per dollar. Onshore markets are closed until Wednesday, and the baht ended Fridays trading at 35.35 per dollar.
"Consumer and business confidence remain relatively weak, partly influenced by the uncertain political outlook," analysts at Standard Chartered Bank said in a note. "As such, Thailand will be an under-performer in terms of growth in Asia, and Thai authorities are likely to tolerate a modest weakening of the baht NEER (nominal effective exchange rate) to support exporters."
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