The Indonesian rupiah jumped on Wednesday, on track for its best daily performance in seven years, thanks to capital inflows as expectations of an imminent US interest rate hike ebbed and on central bank intervention to stabilise the currency. Malaysia's ringgit was also poised for its largest daily gain in two years on stronger-than-expected August exports data and resurgent oil prices.
The rupiah rallied 2.8 percent to 13,850 per dollar as of 0625 GMT, which would be the largest daily rise since December 2008 if it sustains the gains to the closing bell. The Indonesian currency rose 1.8 percent on Tuesday, the biggest jump since September 2009. Indonesia's government bond prices rose, led by long-term papers. The 10-year yield fell to 8.710 percent, its lowest since August 20, while the 15-year yield slid to 8.870 percent, the lowest since August 12.
On Tuesday, foreign investors bought a net 844.8 billion rupiah ($61 million) in Jakarta stocks, the largest daily purchase since July 10. "We can certainly expect to see some inflows returning in the near-term, which will support the rupiah to some extent," said Khoon Goh, senior FX strategist for ANZ in Singapore. He said sentiment improved due to waning prospects of an interest rate hike by the Federal Reserve before year-end after disappointing US jobs data last week.
Bank Indonesia has also been intervening in the spot market to prop up the second-worst performing Asian currency so far this year, traders said. Earlier, a central bank official said the rupia's value based on fundamentals should be stronger than 14,000 per dollar. Last week, Bank Indonesia announced a series of currency measures such as intervention in the forward market. The one-month dollar/rupiah forwards lunged almost 30 percent on Wednesday.
The rupiah also jumped in non-deliverable forwards (NDFs) on stop-loss dollar selling. The one-month NDFs advanced as much as 2.4 percent to 13,940 per dollar, its strongest since August 13. Indonesia will announce a third stimulus package later in the day aimed at supporting consumption, streamlining the bureaucracy and reviving economic growth, the chief economics minister said.
The ringgit rose 2.2 percent, which would be the largest daily gain since September 2013, as traders rushed to unwind bearish bets in the worst-performing Asian currency so far this year. Malaysia's exports in August rose 4.1 percent from a year earlier, beating a forecast of 2.0 percent growth in a Reuters poll. The currency found further support as a rebound in global crude prices eased concerns over the country's overseas earnings from oil and gas sales.
Scandinavian bank SEB said it will add the one-month ringgit NDFs holdings with a target of 4.0500 per dollar. The NDFs stood at 4.2500. "The political headwinds have not disappeared but momentum has subsided," said Sean Yokota, head of Asia strategy for SEB in a note. "Commodity price decline is also losing momentum and Malaysia is one of the most commodity sensitive economy due to its palm oil exports." The ringgit has lost 18.4 percent against the dollar so far this year due to low commodity prices and a graft scandal surrounding Prime Minister Najib Razak and indebted state-fund 1 Malaysia Development Berhad.
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