Asian currencies: rupiah outperforms, baht restrained by central bank

The high-yielding Indonesian rupiah outperformed its peers on Wednesday as the US dollar lost ground globally, but the Thai baht's strength was tempered by suspected central bank intervention. The dollar slid to its weakest level in 14 months against a basket of major currencies, under pressure from expectations of continued low US interest rates and investor bets on higher yielding and commodity currencies.
Central banks in Asia have intervened in recent weeks to slow the rise of their currencies against the beleaguered dollar amid concerns about losing export competitiveness. But Sean Callow, currency strategist at Westpac, said there was scope for most Asian currencies to rise against the dollar despite recent rallies.
"Not all dollar/Asia pairs are the same but overall, if you are running large trade surpluses, attracting strong portfolio and FDI inflows and US dollar yields very little, it's highly likely that your currency will rise," he said. He expects China to allow the yuan, which has been virtually pegged to the dollar since mid-2008, to rise again next year.
BAHT The Bank of Thailand was suspected of intervening as Thai baht edged up to 33.25 per dollar. The central bank has been buying dollars in recent weeks to curb the baht's strength to help exporters compete, analysts say. "They have been buying dollar since the baht rose past 34," said another trader in Singapore. The baht broke the 34 level in early September.
RUPIAH The rupiah gained 0.8 percent to 9,370 against a broadly weaker dollar, extending its gains so far this year to 17 percent - the best performing currency in Asia. The rupiah was "still within fundamental range" despite its recent gains, said acting central bank Governor Darmin Nasution. "The rupiah is following other regionals and majors," said a Jakarta-based trader, who cautioned that the central bank may intervene if rupiah hits 9,350.
The rupiah has rallied 3 percent in the past two weeks, pushing down the spread between three-month NDFs and spot rate to 37 points from 130. Foreigners bought a net 4.65 trillion rupiah ($490 million) of rupiah-denominated government bonds last week, according to government data. But they sold a net 111 million in Indonesian stocks last week, according to Nomura.