EMERGING CURRENCIES
Korean won hits 11-yr low
Reuters
First Posted 15:41:00 11/21/2008
Filed Under: Economy and Business and Finance, Foreign Exchange Markets
SINGAPORE -- A bounce in Asian stocks and talk of a temporary revival in investors' risk appetite helped the Korean won recover from 11-year lows against the dollar on Friday, even as the Indonesian rupiah stayed under pressure.
The rupiah hit 13,100 per dollar in trading thinned by wide spreads, a reluctance to sell dollars and the central bank's checks, traders in Jakarta said.
The currency has lost a fifth of its value in little more than three weeks, hit by worries of capital outflows and the possibility local investors may want to move their money out of rupiah.
"I am a bit surprised at how violent the price action has been recently," said Sean Callow, a currency strategist with Westpac Bank in Sydney, citing Indonesia's strong foreign direct investments and comfortable trade balance.
Yet, the risk of portfolio outflows and that of local investors losing confidence in their currency could put the authorities, whose mandate includes ensuring currency stability, in a tight spot, Callow said.
"The risk to Indonesia is not from a sudden stop in foreigners' supply of dollars but rather from a surge in demand from residents," ING economist Tim Condon said in a client note.
The Korean won, hit a 11-year low of 1,524.9 per dollar, but rallied as stocks recovered.
Other Asian currencies such as the Philippine peso and Malaysian ringgit also managed light gains while the Singapore dollar stayed in a steady 1.5295-1.5335 range after the government released data confirming the economy is in recession.
Analysts believe Singapore's central bank will gradually ease policy further over the next few months, through a weaker currency, to support consumers in the heavily trade-weighted economy.
The central bank said on Friday it had no plans to ease monetary policy before its next policy review in April, although most analysts expect it will covertly allow the currency to weaken.
Monetary policy in Singapore is run by guiding the currency within a secret policy band. The Monetary Authority of Singapore (MAS) eased policy in October by shifting to a zero appreciation path.
Westpac's Callow said the Singapore dollar was in the middle of the secret trade-weighted band, as per his estimates.
"MAS intervention at this point would only be to cool down markets to reduce volatility rather than defend an excessively weak Singapore dollar. I just don't think it is particularly weak," he said.
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