SINGAPORE, Sept 19: The Indian rupee led a rally in emerging Asian currencies on Thursday after the U.S. Federal Reserve surprised investors by postponing the start of reductions to its monetary stimulus, prompting capital inflows to the region.
The Fed said it wanted to wait for more evidence of solid growth in the world’s top economy and Chairman Ben Bernanke refused to commit to reducing bond purchases this year, stressing that the programme was ‘not on a preset course.’
‘Asian currencies should stage a strong comeback,’ said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong.
‘From the perspectives of correlations with U.S. Treasury yields and the fact that some (countries) had suffered due to their economies’ external deficits, the Indian rupee and the Indonesian rupiah should benefit the most from the delayed tapering,’ Cheung said.
The rupee surged as much as 2.8 percent to a near five-week high, outperforming regional currencies.
The Indonesian rupiah advanced 1.5 percent on capital inflows, traders said.
The Thai baht and the Malaysian ringgit also enjoyed demand from real money funds, while the Philippine peso gained on offshore funds buying.
The South Korean won rose in offshore forwards markets, with local financial markets closed for holidays. One-month non-deliverable forwards (NDFs) to the dollar were quoted at 1,072.1 versus around 1,083 on Wednesday afternoon.
Regional stocks rallied broadly while U.S. Bond yields and the dollar dropped.
Most emerging Asian currencies have fallen so far this year as the Fed was expected to scale back its $85 billion monthly bond-buying programme. That caused capital outflows from the region, especially Southeast Asia.
The rupiah and the rupee led the regional depreciation as India and Indonesia were seen more vulnerable to a potential Fed policy shift because of the countries’ current account deficits.
However, the jubilation over the Fed’s move is unlikely to last long in emerging Asia as there are still tapering risks, some analysts and traders said.
Some emerging Asian currencies are now seen as technically overbought, they added.
‘We are seeing overshooting for now in Asia,’ said Saktiandi Supaat, head of FX research for Maybank in Singapore.
‘Dollar strength will return. U.S. Data may come in better over time, that will lead to further taper expectations. We are not done yet.’
POSSIBLE ASIA INTERVENTION
With the global economy still fragile, Asian foreign exchange authorities are likely to remain wary of letting their currencies appreciate too far, too fast, threatening export competitiveness.
Earlier, the Philippine central bank said it would keep intervening in the currency market to manage wild swings.
The governor of the Bank of Thailand also said that central bank is ready to act on excessive currency move.
Some Asian authorities, such as South Korea and Taiwan, have already been recently spotted intervening to stem their currency appreciation, according to traders.
RINGGIT
The ringgit jumped as much as 2.5 percent to 3.1560 per dollar, its strongest since July 11.
In addition to demand from real money funds, the Malaysian currency found more support as investors covered short positions both against the U.S. Dollar and the Singapore dollar , traders said.
Against the city-state’s currency, the ringgit advanced 2.2 percent to 2.5357, its strongest since July 29.
Still, Malaysian importers bought the U.S. Dollars for payment, limiting the ringgit’s upside, traders said.
It has a chart resistance area around 3.1520-3.1570 to the greenback, analysts said.
BAHT
The baht leapt as much as 2.4 percent to 30.940 per dollar, its strongest since July 25.
Bangkok shares jumped more than 3 percent, while 5- and 10-year government bond yields plunged.
The Thai currency faces chart resistance at 30.966, the 38.2 percent Fibonacci retracement of its April-September depreciation.
It also has a 100-day moving average at 30.929. The Thai unit has been stayed weaker than the average since mid-May.
But the baht may head to 30.840, its July’s high, if the currency clears those resistance lines, analysts said.
RUPIAH
The rupiah rose 2.4 percent to 11,195 per dollar on capital inflows and Indonesian shares jumped more than 4 percent.
The Indonesian currency gave up some of earlier gains on sustained dollar demand from local companies such as importers, traders said.
The forwards market did not point to further appreciation, with its one-month NDFs to the dollar weakening to 10,983 at a point.
‘As long as the dollar demand is still huge, the 11,000 will be a good support,’ said a Jakarta-based trader, referring to spot dollar’s value to the rupiah.
The trader said there were more importer clients than exporters.
PHILIPPINE PESO
The peso gained 1.1 percent to 43.05 against the greenback, its strongest since July 1, on demand from offshore funds.
But it also pared initial gains as the central bank was suspected of buying dollars to stem its upside, along with its governor’s comments, traders said.
‘It should because we are lagging the other currencies in the region,’ said a Philippine bank trader in Manila, when asked if the peso would strengthen further.
The peso may head to 42.93, the trader expected.
‘But if the central bank doesn’t stop buying dollars, then we will just remain stuck here.’
CURRENCIES VS U.S. DOLLAR
Change on the day at 0445 GMT
Currency Latest bid Previous day Pct Move
Japan yen 98.40 97.96 -0.45
Sing dlr 1.2444 1.2460 +0.13
*Taiwan dlr 29.722 29.752 +0.10
*Korean won 1069.90 1084.10 +1.33
Baht 31.00 31.68 +2.18
Peso 43.11 43.53 +0.99
Rupiah 11288.00 11460.00 +1.52
Rupee 61.82 63.38 +2.52
Ringgit 3.1620 3.2340 +2.28
*Yuan 6.1212 6.1215 +0.00
Change so far in 2013
Currency Latest bid End prev year Pct Move
Japan yen 98.40 86.79 -11.80
Sing dlr 1.2444 1.2219 -1.81
Taiwan dlr 29.722 29.136 -1.97
Korean won 1069.90 1070.60 +0.07
Baht 31.00 30.61 -1.26
Peso 43.11 41.05 -4.77
Rupiah 11288.00 9630.00 -14.69
Rupee 61.82 54.99 -11.05
Ringgit 3.1620 3.0580 -3.29
Yuan 6.1212 6.2303 +1.78
* Financial markets in China, South Korea and Taiwan are closed for holidays Thursday and Friday.
(agencies)
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