The South Korean won led Asian currencies lower on Friday as investors dumped riskier assets on jitters over debt problems in Europe, prompting central banks in Indonesia and the Philippines to intervene to support their currencies. Asian stocks dipped, while dollar extended its gains from the previous day due to investor anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the euro.
But the euro leapt against the Swiss franc as the Swiss central bank intervened to weaken its own currency. The ero earlier plunged to a 15-month low against the franc. Weakness in the Indonesian rupiah and Philippine peso prompted their central banks to intervene, traders said. "I would place them in the category of Asian central banks that are genuinely concerned about volatility of their illiquid currencies so would not be at all surprised if they stepped in to calm rupiah and peso on what is a very nervous count-down to payrolls," said Westpac currency strategist Sean Callow.
Asian central banks usually intervene by buying dollars to limit the rise in their currencies to support local exporters, but also step in to smooth sharp currency falls. The spot won tumbled about 2 percent in early trade to 1,176.9 per dollar but later steadied near 1,170. The won, which has lost more than 4 percent since January 11, faces further weakness after a dip below the 100-day moving average at 1,162 on Friday.
Offshore dollar/won NDFs jumped amid jitters over sovereign debt risks in Europe, but they later trimmed gains as Korean exporters start selling. One-month NDFs steadied near 1,170 after hitting as high as 1,178.6 compared to Thursday's close at 1,174. "We see strong selling by exporters, funds are staying aside now. It was a drama last night, with euro collapsing and everything squeezed. I think all want to take a breath before US non-farm payrolls and G7 meeting this weekend," said a Singapore-based NDF trader.
Manwhile, won's implied volatilities hit 15 percent from 14 percent on Thursday as the spot dips. "Won vols are well bid as dollar/won moves higher," said an option trader. The high-yielding rupiah fell as far as 9,410 per dollar - down 1 percent from Thursday's close - as traders spotted official intervention to support the unit.
"BI (the central bank) is interferring in the market just to stabilise the rupiah - they are selling dollars at 9,410," said a trader in Jakarta. The Philippine peso shed 0.8 percent to 46.53 per dollar. "We suspect the central bank was selling dollars at today's high," said a trader in Manila. The rupiah has shed 3 percent since early January while the peso has lost 2 percent.