The Indonesian rupiah and Philippine peso lost ground on Thursday as investors sold regional stocks amid concerns that rising US Treasury yields may hamper recovery in the world's largest economy. The South Korean won was also among the worst hit due to persistent worries about geopolitical tensions on the Korean peninsula following the North's nuclear test this week. Trading activity was slowed by holidays in China and Taiwan.
RUPIAH The high-yielding Indonesian rupiah fell almost 0.9 percent to 10,395 per dollar - its lowest in a week. But the rupiah remained the best performer in Asia with a 6.3 percent gain against the dollar so far this year. "The sentiment in dollar is bullish today," said a Singapore-based trader.
Six-month offshore non-deliverable forwards (NDFs) held steady at 10,680, implying a 2.8 percent rupiah fall from the spot. Meanwhile, six-month onshore forwards priced in a 3.9 percent rupiah depreciation from the spot, suggesting offshore investors were less bearish on the currency. The rupiah has rallied 15 percent since early March due to tentative signs of a global economic recovery, but the high yielder is seen vulnerable to any flare-up in risk aversion.
"We judge that if global risk aversion returns, there could be potential renewed selling pressure on the rupiah because of a current account deficit and relatively low cover of FX reserves to short-term external debt," analysts at Nomura said in a note.
PESO The Philippine peso fell as much as 0.7 percent to 47.69 per dollar, its weakest level more than a week, after data showed the economy contracted in the first quarter by its biggest margin in two decades. The Philippine gross domestic product shrank by a bigger-than-expected 2.3 percent in the first quarter from the last three months of 2008 and a senior government official said the economy could be heading for a recession.
The central bank is expected to cut its key interest rate by moderate 25 basis points later in the day, despite the bleak GDP data, according to a Reuters poll. Meanwhile, three-month offshore dollar/peso NDFs rose to 47.84 but failed to match the spot's move, implying a 0.7 percent peso fall from the spot compared to 1.4 percent on Wednesday. The charts suggested the peso may weaken towards 48 in the coming days once the critical resistance at 47.70 was cleared, traders said.