The Indonesia rupiah and the South Korean won led a broader fall across emerging Asian currencies on Thursday as investors, concerned about a looming fiscal crisis in the United States, cut back on risky assets including stocks. With the US presidential election out of the way, the focus has shifted to the "fiscal cliff" of nearly $600 billion worth of spending cuts and tax increases set for early 2013, which investors fear could push the world's top economy back into a recession.
The Indonesian rupiah fell 0.4 percent against the dollar as corporates bought the greenback, and later, the country's central bank intervened to stem its fall, traders said. The won and the Malaysian ringgit also lost ground as investors worried that the problems in the United States would feed into the global economy, just as signs are emerging that the slowdown is easing in Asia.
"If the cliff continues to loom, the overriding concern is that a global appetite destruction will overwhelm economic improvements in Asia," said Emmanuel Ng, a foreign exchange strategist at OCBC Bank in Singapore. The rupiah and the Indian rupee were more vulnerable than other emerging Asian currencies due to the large current account deficits that the two countries ran, Ng said.
The rupiah and the rupee were the two worst performers in the region so far this year, weakening 6.0 percent and 2.5 percent against the dollar respectively, according to Thomson Reuters data. The rupiah fell on sustained dollar demand from corporates, although the central bank was spotted providing greenbacks through state-run banks, dealers said.
Some dealers said the authority may allow gradual weakness in the rupiah to help exports, even though it will keep controlling the pace of depreciation. On Monday, Bambang Brodjonegoro, the head of the fiscal office at the finance ministry, said the ministry is "comfortable" with the current level of the rupiah as it may ease the country's trade imbalance.
The won slid as investors covered dollar-short positions, with the South Korean currency technically seen overbought. The 14-day dollar/won relative strength index (RSI) stood at 29.9, still slightly below the 30 threshold, indicating the pair has been excessively sold. But domestic exporters including shipbuilders bought the local unit for settlements on dips.
"The won is seen falling further if we consider only external factors, but it is unlikely to extend the slide, given exporters' deals," said a South Korean bank dealer in Seoul. On Wednesday, the won hit a 14-month high against the dollar helped by demand from offshore funds as Obama's victory ensured sustained quantitative easing by the Federal Reserve, which is expected to keep bringing funds to emerging Asia. The ringgit eased as offshore funds and local interbank speculators sold the Malaysian currency.
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