Indonesia's rupiah stayed under pressure in Asian markets on Friday after its efforts to regulate foreign exchange outflows stoked rather than removed investors' fears the currency is set for a steeper fall in coming weeks. But the trend was far from uniform in Asia as a recovery in stock markets helped some currencies even as economic fears were heightened by the bleak news on US joblessness and confirmation that Germany is in recession.
The yen's rally against the dollar and euro revealed risk aversion was one of the drivers of Friday's trading. The Singapore dollar, South Korean won and Indian rupee were among those that weakened against the dollar, while the Philippine peso and Malaysian ringgit managed light gains.
The rupiah fell 1.5 percent to 11,675 a dollar, after it had recovered from a 7-year low of 12,000 on Thursday to close at 11,500. The currency, already under pressure from an unwinding of risky trades and portfolio outflows, has come under new selling pressure from a central bank directive that foreign currency purchases in excess of $100,000 need to be supported by documentation. That rule has given rise to worries the central bank is bracing for huge speculative outflows from the country, and prompted concern over further capital controls.
"The increased risk of capital controls is likely to deter capital inflows and expedite capital flight, thereby further weakening the rupiah," Stewart Newnham, a strategist at Morgan Stanley, said in a note. Meanwhile, Indonesian non-deliverable forwards priced in a seven percent fall in the currency in a month. The rupiah has already fallen 20 percent so far this year. One-month NDFs were quoted at 12,650 per dollar, off Thursday's weakest at 13,100, but still wide enough from the spot rate to show markets price in a sharp sell off.