Rupee leads Asia FX slide; SE Asia currencies at multi-year lows

Wednesday, 28 August 2013 00:00 -     - {{hitsCtrl.values.hits}}

Reuters: The Indian rupee fell towards record lows on Tuesday, leading slides among emerging Asian currencies with Southeast Asian units at multi-year lows as concerns over possible US military action against the Syrian government dented risk sentiment. The rupee slid after the lower house of Parliament approved a plan worth nearly $ 20 billion to provide cheap grain to the poor. The Indonesian rupiah hit a fresh four-year low on corporate dollar demand. The Malaysian ringgit touched its lowest in more than three years on selling by foreigners, while the Thai baht hit a three-year low on capital outflows. The Philippine peso fell to its weakest in more than two and a half years as local stocks plunged. “Syria escalated geopolitical risks and appetite for a safe haven. That will put pressure on Asian currencies,” said Jeong my-young, Samsung Futures research head in Seoul. “Some of them, like the rupee and the rupiah, are unlikely to see a recovery as their problems are not a short-term liquidity issue. Even though they do their best, it will take a long time to stabilise their economies,” said Jeong. The two currencies were most vulnerable to an anticipated withdrawal in quantitative easing by the Federal Reserve due to India and Indonesia’s widening current account deficits, slowing economic growth and strong resistance to implementing much-needed reforms. Southeast Asian currencies have suffered capital outflows due to deteriorating economic fundamentals. US durable goods orders reported their biggest drop in nearly a year in July, but the data barely changed views that the Fed may dial down its stimulus program as early as next month. The rupiah lost 0.6% to 10,900 per dollar, its weakest since April 2009, in the local interbank market. Traders said some corporates bought dollars above 11,000, while the central bank was spotted selling the greenback at lower levels, traders said. Jakarta stocks fell nearly 3%. Forwards markets pointed to further declines in the rupiah with one-month non-deliverable forwards per dollar weakening to 11,708, its lowest since April 2009. The one-month offshore/onshore forward spread widened to 700 basis points, the widest since November 2008, during the global financial crisis. “Some banks already placed dollar offers at 11,400-11,500 area,” said a Jakarta-based traders. “It won’t take long to reach 11,500,” the trader added. The ringgit lost as much as 0.6% to 3.3300 per dollar, its weakest since June 2010, on selling from foreigners. The Malaysian currency managed to stay firmer than the intraday low as the central bank was spotted buying the currency, traders said. Still, the ringgit is seen heading to 3.3345, the 50.0% Fibonacci retracement of its appreciation between 2009 and 2011, traders and analysts said. “Month-end dollar demand is usually strong,” said an Asia bank trader in Singapore, adding that the ringgit was expected to weaken further. The baht fell up to 0.7% to 32.160 to the greenback, its weakest since August 2010, pressured by capital outflows and dollar demand from importers. The 10-year government bond yield rose to 4.31%, while the five-year yield advanced to 3.84%. The baht’s slide was limited as the central bank was spotted in the market, but it is on a falling trend, traders said. The Thai currency is expected to weaken to 32.425, the 50% retracement of its appreciation between 2009 and 2013. The peso fell 0.4% to 44.445 per dollar, its softest since January 2011, as Manila stocks lost more than 4%. Three-, five- and 10-year government bond yields also rose. The peso is not immune to weakness in the regional currencies, but some traders said the Philippines may see smaller outflows than other Southeast Asian countries. “Yes, but I don’t think it will be as much as our ASEAN neighbours,” said a Philippine bank trader in Manila, referring to the Association of Southeast Asian Nations. Earlier, the central bank governor said the currency should not suffer the fate of other regional currencies which were caught in an emerging market sell-off recently, given the country’s sound macroeconomic fundamentals. The Philippines’ June imports value fell to a four-month low with a $ 370 million trade deficit, compared with a $ 789 million gap a year earlier, data showed on Tuesday.