The South Korean won retreated from a 15-month high and most Asian currencies were steady to lower on Friday, hurt by concerns about the lack of progress in talks aimed at heading off a looming US fiscal crisis. The won dipped 0.1 percent to 1073.7 to the dollar, pulling away from the previous day's high of 1071.0, the South Korean currency's strongest level since September 2011.
The South Korean currency had hit 15-month highs for four straight days up to Thursday, buoyed by foreign capital inflows into South Korean assets, dollar-selling by local exporters, and the US Federal Reserve's announcement on Wednesday of a new round of monetary stimulus.
The won and most other Asian currencies edged lower on Friday, however, as focus shifted to the slow progress in talks aimed at avoiding the US "fiscal cliff" of steep tax increases and spending cuts that could drag the US economy into recession. "New York ended with a tinge of fiscal cliff concerns and this may have eroded risk appetite levels to some extent," said Emmanuel Ng, a foreign exchange strategist for OCBC Bank in Singapore, referring to moves in US markets on Thursday, when the S&P 500 ended its six-day winning streak.
Analysts say risky assets and emerging Asian currencies could come under further pressure if US lawmakers fail to reach a deal to avoid the fiscal cliff by the end of the year. On one-month non-deliverable forwards (NDFs), the rupiah has support at its 39-month low against the dollar hit earlier this week, Axel Rudolph, senior technical analyst for Commerzbank, said in a research note.
A drop below that low, however, could open the way to a further decline in the rupiah, he said, adding that the next downside target for the rupiah on one-month NDFs would be its August 2009 high. According to Reuters data, the rupiah's August 2009 high on one-month NDFs is 9,885. On technical charts, such previous resistance levels are later considered to be potential support levels. On one-month NDFs, the rupiah hit a low of 9,810 against the dollar on Monday, the rupiah's lowest level since September 2009, according to Reuters data.
The rupiah last stood at 9,705 to the dollar on one-month NDFs, which are used by offshore players. The rupiah has come under renewed pressure after data last week showed that Indonesia logged a record $1.54 billion trade deficit in October as exports fell more than expected and imports surged. The peso hit a three-week low of 41.190 to the dollar, extending its losses after having dropped below trendline support the previous day.
The trendline, drawn through the peso's lows hit in late May, late August and mid-November, now lies at about 41.000. The peso's drop stalled right around its November 21 trough of 41.210. After that, possible support comes in at 41.290, its November 19 low, and then at the peso's mid-November low near 41.400.