Most emerging Asian currencies slid on Friday as deepening uncertainty over a US budget deal prompted investors to reduce risky assets after a Republican attempt to avert the US "fiscal cliff" failed. The Indonesian rupiah slid, with dollar/rupiah non-deliverable forwards (NDFs) at their highest in more than three years. The Singapore dollar and the Philippine peso eased as investors covered short positions in the US dollar.
US House Speaker John Boehner abandoned a tax bill designed to prevent the fiscal cliff of automatic spending cuts and tax increases set to start January 1, denting other risky assets including Asian stocks and the euro. "Fiscal cliff worries are likely to keep investors away from Asian currencies for a few days more, although markets may be less sensitive to these issues because of the year-end effect," said a European bank dealer in Singapore.
One-month dollar/rupiah NDFs rose 0.5 percent to 9,845, their highest since September 2009. A break above 9,800 in the NDFs triggered faresh round of buying from speculators and hedge-related purchases, dealers said. The central bank was noticed selling dollars at 9,670 they added.
The Singapore dollar slid as worries over the fiscal cliff prompted investors to cover short US dollar positions, although the city-state's currency took heart from corporate demand. The Philippine peso eased as investors squared bullish positions with the country's financial markets closed until Tuesday. But the central bank Deputy Governor Diwa Guinigundo said the Philippine currency is likely to stay firm next year. Capital inflows on a possible credit rating upgrade will give Bangko Sentral ng Pilipinas a greater challenge in terms of keeping the peso stable, he said.
"Without the BSP's participation in the forex market, the peso could have been firmer. But we really have to allow fundamentals to determine the peso dollar rate, and that's what happened in the first nine or 10 months of 2012, even up to the end of November," he said.