Asian currencies strengthened on Wednesday, with the rupiah, won and baht near one-year highs as better than expected US retail sales and manufacturing data spurred investors into riskier assets. However, traders said the central banks of South Korea and Thailand intervened by buying US dollars to keep gains in their currencies in check.
RUPIAH The Indonesian rupiah rose to 9,765 to the US dollar, the highest level since October last year, helped by Moody's raising the country's sovereign rating to Ba2 from Ba3 due to its economic resilience and upbeat growth prospects.
The rupiah, which is Asia's best performer this year with a near 13 percent gain against the dollar, was capped by dollar demand from importers ahead of a long holiday weekend that stretches from Friday to next Wednesday. Traders said there was no sign of central bank intervention so far. "The major theme today is a weakening global US dollar," said a currency dealer in Singapore.
"Central bank actions vary from country to country. In certain countries, they are supporting the US dollar to help their exports, but for others like Indonesia, they are trying seek a stronger local currency to go against inflation stress." Implied volatility on the rupiah remained low, with the one-month volatility quoted at just 9 percent, compared with more than 20 percent earlier this year.
WON, BAHT The South Korean won rose to around 1,207 to the dollar, the strongest since October last year. Dealers said the central bank was buying US dollars to limit the rise in an effort to ensure exports of technology gadgets, autos and steel remain competitive.
"We expect the Bank of Korea's intervention to smooth rather than to reverse the USD/KRW decline," J.P. Morgan said in a report. Traders said the won's short-term risk reversals were close to favouring won call options despite the Bank of Korea's suspected intervention. In Thailand, the baht rose to 33.70 per dollar, a one-year high, with the central bank suspected of having intervened to curb its strength.