The South Korean won led Asian currencies lower on Friday as the Federal Reserve's surprise discount rate rise spurred a dollar rally, prompting Indonesia's central bank to defend the currency for the second day. The dollar hit a 8-month high against major currencies after the Federal Reserve said it would raise the discount rate to 0.75 percent from 0.50 percent, stoking expectations that it is moving towards normalising policy.
Asian currencies have been undermined in recent weeks by the dollar's broad resurgence and capital outflows associated with the sell-off in riskier assets, and higher US interest rates tend to encourage such outflows. Markets in China and Taiwan remained shut for holidays.
WON The won lost as much as 0.9 percent to 1,161.20 per dollar, but it later stabilised near 1,160. Implied volatilities in the won edged up as the spot slipped, but investors appeared to be reluctant to snap up volatilities amid signs that the won was stabilising.
"We just see a bit of buying interest in the front-end with dollar/won spot moving higher," said an option trader in Singapore. One-month vols rose to 12.64 percent from 12.49 percent late on Thursday. The vols hit as high as 16.6 percent earlier this month as the won's steep decline caught investors off guard, but they have come off steadily as the spot rate recovered.
RUPIAH The rupiah fell as much as 0.8 percent to 9,365 to the dollar, but it later cut losses as traders suspected dollar-selling intervention by the central bank. "Bank Indonesia started selling dollars from 9,350 to 9,365," said a trader in Jakarta, adding that the rupiah could quickly fall to 9,400 if the central bank had not intervened. A second trader said the central bank was aiming to check the rupiah's volatility amid broad dollar strength in recent sessions.
PESO Dollar/peso non-deliverable forwards jumped across the curve in line with the dollar's broad rally, but the rise lacked momentum, traders said. "We see higher bids at the opening but not much now," said a NDF trader in Manila. One-month NDFs hit as high 46.51 in early trade compared to 46.25 late on Thursday, while onshore forwards with the same tenor edged up to 46.42 from Thursday's 45.26. That means offshore markets price in a bit more peso depreciation compared to onshore. Meanwhile, spot peso fell 0.4 percent to 46.39 per dollar but traders expected it to get near-term support at 46.40.