The Indonesian rupiah hit a seven-week high on Thursday, in tandem with firmer local stocks and bond prices a day after a tense presidential election, but pared some gains on uncertainty over the winner of the country's most closely fought election. Other emerging Asian currencies advanced after minutes of the US Federal Reserve's June meeting provided no clear time frame of when interest rates will rise.
The Chinese yuan hovered around a three-month high after the central bank fixed its midpoint much stronger than expected while annual high-level talks between China and the United States took place. Earlier, the rupiah rose as much as 1.0 percent to 11,500 per dollar, its strongest since May 22, as Jakarta Governor Joko "Jokowi" Widodo said on Wednesday he had won based on quick counts of more than 90 percent of the votes.
The Indonesian currency, however, gave up some gains as investors took profits and its non-deliverable forwards fell. Jokowi's rival ex-general Prabowo Subianto also declared himself the winner based on contradictory quick count results in the closest election ever in Southeast Asia's largest economy.
That suggests a winner will unlikely be known until official results are announced in two weeks. The quick counts are conducted by private agencies which collate actual vote tallies from each district. "We are currently long IDR vs USD in our Asia FX portfolio," said Sean Yokota, head of Asia strategy at Scandinavian bank SEB, saying the majority of unofficial quick counts show Jokowi's victory.
The official outcome of the election will not be known until July 22 and the Constitutional Court has until August 22 to rule on any challenges. Challenges could drag things out and may add to concern about the potential for violence between the two sides. The outgoing Susilo Bambang Yudhoyono urged the two candidates to keep their supporters in check during what will be an agonising two-week wait for the official result. A currency trader in Jakarta said the rupiah could have strengthened past the psychologically important level of 11,500 if Jokowi's victory was clearer.
"I bought dollars at the lowest point to square my positions as Jokowi euphoria waned," said the trader, adding he had built up long rupiah bets around 11,700 on expectations of a Jokowi victory. Technically, the rupiah has a resistance level at 11,448, the 76.4 percent Fibonacci retracement of its depreciation between April and June. The rupiah and other Indonesian assets have priced in Jokowi's victory to some degree, traders and analysts said.
The Indonesian currency has risen more than 2.5 percent against the dollar so far this month, becoming the best performing emerging Asian currency of the year, according to Thomson Reuters data. The Thai baht rose as much as 0.4 percent to 32.11 per dollar, its strongest since April 10, on demand from hedge funds.
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