The Indonesian rupiah fell to a three-week low on Wednesday as markets braced for social unrest on government plans to raise sensitive fuel prices from October 1.
The rupiah's 0.8 percent decline to 10,355 per dollar contrasted with other Asian currencies, which were little changed from late Asian trading on Tuesday.
The Philippine peso outperformed by gaining as much as half a percent on lower-than-expected month-end dollar demand and as traders bought back the currency, having seen its resilience in the face of the political crisis facing the president.
The rupiah's decline began in late Asian trading on growing concerns that a planned increase in fuel prices will trigger street protests and threaten political stability.
President Susilo Bambang Yudhoyono has promised to raise fuel prices on October 1 in a bid to cut the government's fuel subsidies and reduce expensive fuel imports that threaten to worsen Indonesia's balance of payments.
Although the president did not disclose the extent of the rise, ministers have said fuel prices could rise by more than 50 percent.
"People are preparing for massive demonstrations. That's unsettling for investors," said Sani Hamid, currency analyst at 4Cast in Singapore, adding that corporate demand for dollars was also pushing the rupiah lower.
Indonesian central bank Deputy Governor Miranda Goeltom said on Wednesday higher fuel prices would almost certainly mean consumer inflation tops its 2005 forecast of 9 percent.
Concerns over soaring inflation, a worsening balance of payments situation as the cost of imported fuels surged and the central bank's reluctance to raise benchmark interest rates, pushed the rupiah to a four-year low of 11,750 per dollar on August 30.
The central bank has since boosted its benchmark rate, helping the rupiah recover from those lows. The Philippine peso climbed to a high of 56.01 per dollar, its strongest since September 15. The currency is up 0.4 percent this year, making it Asia's best performing currency after the Chinese yuan and the Malaysian ringgit.
Many investors had expected the political turmoil caused by fraud allegations against President Gloria Macapagal Arroyo to lead to an outflow of funds from the country.
"Some people were being too negative about the political situation," the dealer said. "There has been no outflow of funds. Also, the stock market is doing well."
Manila's benchmark stock index has climbed 3.2 percent in the past two weeks.
The central bank last week raised its benchmark interest rate by a quarter percentage point and Deputy Governor Diwa Guinigundo said on Wednesday it was not ruling out further increases this year, given oil-fuelled inflationary pressures.
The Singapore dollar recovered from a 2-1/2-month low struck earlier on Wednesday after suspected intervention by the central bank. The Sing dollar fell to 1.6948 per US dollar in early trading as traders continued selling the currency after seeing heavy US dollar buying by local banks on Tuesday, purportedly to fund government imports.
Traders were perplexed by the Sing dollar's weakness, just ahead of a policy meeting next month when the Monetary Authority of Singapore is expected to retain a policy-tightening bias.