Singapore. Indonesia’s rupiah hit a near 17-year low on Thursday, leading losses among emerging Asian currencies, as the dollar rose to a fresh 11-year high ahead of the launch of quantitative easing by the European Central Bank.

The rupiah weakened past the psychological support level of 13,000 per dollar for the first time since the 1997-98 Asian financial crisis.

Indonesia’s senior central bank deputy governor said onshore corporate dollar demand was contributing to the weakness and a current account deficit of 3 percent of gross domestic product this year would be acceptable.

The Malaysian ringgit hit a six-year low as offshore funds sold the currency.

The dollar advanced to its strongest since September 2003 against a basket of six major currencies. The ECB is expected to announce details of its planned 1.1 billion euro ($1.2 billion) bond-buying programme later in the day.

The greenback found further support from a stronger-than-expected U.S. service sector indicator and as a private jobs number for February was seen positive for an official non-farm payrolls data due on Friday.

Solid jobs data is likely to bolster expectations that the U.S. Federal Reserve may raise interest rates earlier.

By contrast, more Asian central banks are easing monetary policy to tackle slowing growth and deflationary pressures, hurting their currencies.

“The latest monetary policy softening by the PBOC, RBI, and BI may continue to send a fairly unambiguous signal to USD bulls, with yield considerations being put on the back burner in the short term and as broad USD dynamics take a hold,” said Emmanuel Ng, a foreign exchange strategist with OCBC Bank, in a client note.

The Reserve Bank of India on Wednesday delivered another unexpected rate cut in its second inter-meeting this year. The People’s Bank of China on Saturday slashed interest rates, while Bank Indonesia surprised investors by lowering borrowing costs on Feb. 17.

Economists see more rate cuts in all three countries in coming quarters.

Rupiah   

The rupiah fell as much as 0.4 percent to 13,025 per dollar, its weakest since August 1998.

The Indonesian currency slid in most non-deliverable forwards markets with the three-month NDFs pricing in a 13 percent annualised depreciation in the spot. Offshore real money investors sold the rupiah in NDFs markets.

The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 13,022 rupiah per dollar, the weakest since the launch.

The central bank was spotted intervening to support spot rupiah around 13,030, traders said.

The government bond lost ground. The 10-year bond yield  rose to 7.320 percent from Wednesday’s 7.146 percent.

Foreign portfolio investors are showing signs of losing faith in the country’s ability to support the rupiah.

Ringgit   

The ringgit slid 0.3 percent to 3.6580 per dollar, its weakest since March 2009.

Offshore real money accounts and hedge funds sold the currency in one-month NDFs in overnight market.

Spot ringgit pared some of earlier losses on caution over possible intervention by the central bank to support the currency.

Investors awaited the central bank’s monetary policy meeting later in the day. Bank Negara is expected to keep its overnight policy interest rate unchanged at 3.25 percent, a Reuters poll showed.

Won   

The won eased as the yen’s weakness kept investors wary of potential intervention by the foreign exchange authorities to stem the South Korean currency’s strength versus the Japanese unit.     Still, exporters were lined up to buy the won on dips, especially when it was weaker than 1,100 per dollar, traders said.
Foreign investors turned net buyers of South Korean stocks in February, while they continued to purchase local bonds in the past two months, Financial Supervisory Service data showed earlier.

Reuters

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Source: The Jakarta Globe