The Indonesian rupiah hit a near eight-week high on Friday, leading gains among emerging Asian currencies, as expectations the US Federal Reserve will maintain its bond-buying programme through early next year kept the dollar pressured. The rupiah is poised to enjoy the best week in more than four years on capital inflows and demand from real money funds. The Malaysian ringgit gained on hopes the government will announce later in the day measures to cut the fiscal deficit.
The dollar stayed around a nine-month low against a basket of major currencies as a disappointing US jobs data earlier this week cemented views that the Fed's plans to taper its stimulus won't start until next year. "With the market pushing out the timing of Fed tapering until March 2014, further portfolio inflows into emerging Asia can be expected in the near-term," ANZ said in a client note.
Even before the US September payrolls number, most emerging Asian currencies had gravitated to the view that the recently-ended 16-day US government shutdown will likely prompt the Fed to delay a shift in policy. The rupiah took top honours in emerging Asia this week, making the most out of the dollar's dour near term outlook. The Indonesian currency has risen 3.0 percent against the dollar, the largest weekly gain since the week ended on June 5, 2009, according to Thomson Reuters data.
The rupiah is seen as one of the most vulnerable to the Fed's tapering due to Indonesia's sizable current account deficit. It remains the worst-performing Asian currency of the year. Last week, central bank Governor Agus Martowardojo said the current account deficit is likely to ease to less than 3 percent of gross domestic product. The gap hit 4.4 percent in the second quarter.
The ringgit has also gained 0.4 percent so far this week, while the Taiwan dollar has risen 0.2 percent. The Singapore dollar is up 0.1 percent. The South Korean won took a different path, turning weaker for the week with a 0.1 percent loss after the foreign exchange authorities on Thursday were spotted buying dollars after earlier warning against "excessive" won moves. The rupiah rose as much as 1.6 percent to 10,970 per dollar, its strongest since September 2, on demand from custodian banks.
The forward onshore market, or Jakarta Interbank Spot Dollar Rate (JISDOR), was fixed at 11,142 per dollar, compared with Thursday's 11,268. The ringgit advanced on hopes that the government may announce steps to tackle Malaysia's fiscal deficit when Prime Minister Najib Razak unveils the 2014 budget. "Our fundamental view is mildly bullish on the budget and we expect price to head towards 3.0770 should the budget meet expectations," Maybank said, referring to the ringgit's value to the dollar, in a note. The Malaysian currency has a chart resistance at 3.1410, a 200-day moving average.
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