Asian currencies fall

The Malaysian ringgit fell on Wednesday due to lingering concerns about the global economy, while Indian rupee retraced some of its sharp rally this week as investors took profits. Japan's economy shrank a record 4.0 percent in the first quarter, threatening any export-led recovery later this year, while the World Bank said market enthusiasm about China's economic recovery is premature. The ringgit fell 0.7 percent to 3.5535 per dollar.
"Ringgit is tracking Singapore dollar lower," said a Singapore-based dealer. Suresh Ramanathan, strategist at CIBM, said the ringgit's fall was caused by profit-taking and dollar-buying by local corporates. The ringgit is still up around 5 percent from early March as part of an Asia-wide rally against the dollar buoyed by tentative signs of a global economic recovery. Meanwhile, six-month offshore dollar/ringgit NDFs rose to 3.5575, implying a 0.3 percent ringgit fall from the spot compared to 0.5 percent on Tuesday.
"My concern is, given a decent interest rate spread, the onshore forwards may instead move the other way round where they price in a weaker ringgit," said Suresh. The rupee fell 0.4 percent to 47.97 per dollar, a day after it hit a five-month high after a clear victory for the ruling coalition that boosted hopes for economic reforms that help maintain long term growth and investment.
The central bank had bought dollars over the past two days through state-run banks to cap the rupee's sharp rally that amounted to 4 percent in the past three days, dealers said. The Singapore dollar lost 0.3 percent to 1.4665 per US dollar as the market fretted about possible central bank intervention to curb the currency's strength.
The Singapore unit has gained 6 percent since early March, but Westpac strategist Sean Callow reckoned that the currency's trade-weighted gains may be smaller as the US dollar had also weakened against currencies of Singapore's trade partners.
That meant the Singapore's central bank, which manages the currency within a secret trading band against a basket of foreign currencies, may not need to intervene until the Singapore dollar surges further to around 1.41 per US dollar, he said. Last month, the central bank lowered the mid-point of the currency band to help the recession-hit economy.