Asian currencies fell on Monday as investors shed risky assets amid heightened fears about a deepening global slowdown, prompting Indonesia's central bank to step into the market to support the sliding rupiah. The high-yielding rupiah fell as much as 4.6 percent to a one-month low at 12,000 per dollar, forcing the central bank to take action to help smooth currency volatility, traders said.
Central bank governor Boediono said the bank will remain in the market to support the rupiah. The rupiah has lost about 7 percent so far this year - the second worst performing currency in Asia after the South Korean won, which has fallen more than 9 percent.
Asian central banks are leaning towards tolerating currency weakness as the economic outlook darkens, but they are likely to intervene if there are sharp currency swings, analysts say. The won fell about 1 percent to 1,395.4 per dollar after a record drop in January exports, which fuelled concerns over a global recession.
The Philippine peso lost almost 0.7 percent to 47.70 per dollar as investors shed risky assets due to fears of deepening global downturn and moved into the dollar. "I think the economic data that came out in the United States and Europe gave the market renewed risk averse sentiment, thus benefiting the dollar," says a trader in Manila.
Asian stocks lost 1.85 percent as after data showed a worsening labour market and receding inflation in the euro zone and a 3.8 percent contraction in the US economy in the fourth quarter. Elsewhere, the Singapore dollar fell as far as 1.5178 per dollar, its weakest level since December 8.
"Investors are buying the US dollar as many still reckon the Singapore dollar will weaken further on the back of all the gloomy news," said a trader. The Singapore dollar has lost about 5 percent against the US dollar this year as the city state's export-dependent economy sinks deeper into recession amid the global downturn.
Elsewhere, the Chinese yuan fell to 6.8505 per dollar, down a fifth of a percent from its January 23 close - the last trading day before the Lunar New Year holiday. Analysts at J.P. Morgan expect Chinese authorities to keep the yuan largely stable for all of 2009, as fears of protectionist steps from the United States prevent any move to push down the yuan's value to aid struggling local exporters.
"The risk of a large yuan depreciation is low; the leadership in China expects a tough relationship on trade issues with the Obama administration," they said in a note. "Fundamentals still support a stronger yuan. China's exports, while falling, have outperformed neighbouring economies, including Japan, Taiwan, and Korea and (China's) trade surpluses have been hitting record highs."