The high-yielding Indonesian rupiah rose on Thursday, finishing the year with a 17 percent rally on the back of capital inflows, and further gains in Asian currencies are expected despite the dollar's resurgence. The US dollar's rebound since early December has put some pressure on emerging Asian currencies, but analysts are bullish on their long-term outlook due to Asia's faster economic recovery.
"The key operative word will continue to be recovery in Asia and tendency for Asian currencies to appreciate against the US dollar, especially if the yuan resumes its appreciation in 2010," said Emmanuel Ng, currency strategist at OCBC Bank.
Investors are closely watching China's currency policy to see when authorities might tinker with the yuan, which has been virtually pegged to the dollar since mid-2008 to help cope with the global economic downturn. A policy shift to free up the yuan, which is expected by the market to happen later this year as China's exports pick up, will provide more support to other Asian currencies.
China will move ahead with yuan reform at its own pace, keeping a close eye on economic growth and the job market, a unit of the central bank said on Thursday. Markets in South Korea, Thailand and the Philippines were shut for holidays. Charts point to further gains in the South Korean won, which finished the year with a 8 percent gain.
RUPIAH The rupiah gained half of a percent to 9,380 per dollar in tandem with offshore forwards due to year-end positioning, bringing its gain for the year to 17 percent. "We see some offshore buying interest in rupiah, but there is not much action as most corporates are already on holiday," said a dealer in Jakarta.
One-month offshore non-deliverable forwards dollar/rupiah non-deliverable forwards eased to 9,405, implied a 0.2% rupiah fall from the spot. Rupiah has been buoyed by solid capital inflows into Indonesia's stock and bond markets and the market remains bullish on its outlook into 2010. The latest Reuters poll forecast rupiah to gain 5 percent in 2010 to 9,000, trailing the expected rise of 12 percent in South Korean won and 6 percent in Indian rupee.
SINGAPORE DOLLAR Singapore dollar edged up to 1.4022 per US dollar in thin trade, taking its cue from euro's slight rise and bringing its full-year gain to just over 2 percent. Euro inched up to $1.4370 from 1.4332 overnight. The Singapore dollar pierced the 14-day moving average after hitting the upper end of the Bollinger band last week.
The currency shed 1 percent in December due to US dollar's broad rally and is expected to face downward pressure into 2010. "We are bullish on USD vs Singapore dollar for the first quarter then bearish for the remaining of the year, but bear in mind that these days any big news seems to changes the market rapidly," said a trader in Singapore, who predicted the unit to weaken towards 1.42 by end-March.