The rupiah led gains in Asia and had its biggest weekly rally in five months on signs Jakarta Governor Joko Widodo won Indonesia’s presidential race, while South Korea’s won and India’s rupee declined.
Widodo had about a 5 percentage point lead, according to unofficial counts from two survey companies that declared him the winner of the Wednesday vote, a projection disputed by his opponent, Prabowo Subianto. Official results are to be announced by July 22. Most Asian currencies declined on Friday after signs of financial distress in Portugal fueled demand for the US dollar.
“We can see a further rally after the final result, even if much of the expectation for Jokowi’s win has been priced in,” said David Sumual, chief economist at PT Bank Central Asia in Jakarta. “The focus will turn to the new Cabinet.”
The rupiah gained 2.5 percent this week to 11,590 per US dollar on Friday in Jakarta, the most since the five days ended Feb. 14, prices from local banks show.
In Taipei, the New Taiwan dollar weakened 0.2 percent against the greenback to US$29.990, amid concern over the financial situation in Portugal, where a leading shareholder of the country’s second-largest lender, Banco Espirito Santo, missed its debt payments.
The weakness of other regional currencies, including the won and the yuan, further encouraged traders to cut their NT dollar holdings, dealers said.
The won weakened 1 percent to 1,018.92 and the rupee dropped 0.3 percent to 59.9350. The Bloomberg JPMorgan Asia Dollar Index fell 0.1 percent on Friday and was little changed this week.
The Bank of Korea on Thursday reduced its expansion projection to 3.8 percent from 4 percent even as it held its benchmark rate at 2.5 percent. There is a possibility of a rate cut this quarter, Nomura Holdings Inc and Goldman Sachs Group Inc said in reports on Thursday.
The yuan was little changed at 6.2037 this week, China Foreign Exchange Trade System prices show. China is committed to reducing currency intervention as conditions allow, according to a joint statement with the US after the Strategic and Economic Dialogue in Beijing that ended on Thursday. US Treasury Secretary Jack Lew called the pledge a “big change.”
Elsewhere in Asia, Thailand’s baht rose 0.7 percent from July 4 to 32.158 per US dollar and the Malaysian ringgit was steady at 3.1858. The Philippine peso weakened 0.2 percent to 43.552, while Vietnam’s dong gained 0.4 percent to 21,200.
YEN DOMINATES
The US dollar fell the most versus the yen in 13 weeks as the US Federal Reserve signaled willingness to keep borrowing costs at unprecedented lows even as the US labor market improves.
Japan’s currency climbed against most of its 16 major peers and US Treasuries gained as Portugal’s banking problem prompted demand for safer assets.
The US dollar fell versus most major counterparts after minutes of the Federal Open Market Committee’s (FOMC) meeting last month failed to provide additional insight on the pace of rate increases.
“Slightly dovish FOMC minutes was the first trigger,” said Masafumi Takada, a New York-based director at BNP Paribas SA. “Declining US yields as well as ongoing geopolitical risk aversion are putting pressure on dollar-yen.”
The US dollar fell 0.7 percent on the week to ￥101.30 in New York, the biggest drop since the period ended April 11. The greenback weakened 0.1 percent to US$1.3608 per euro. The yen rallied 0.6 percent to 137.90 per euro after appreciating to 137.50, the strongest since Feb. 6.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, fell 0.1 percent to 1,006.89, its fourth drop in five weeks.
Meanwhile, the pound had its first weekly decline since May on signs Britain’s growth is struggling to keep up with economists’ estimates.
The pound declined 0.3 percent this week to US$1.7116 in London on Friday, after climbing to US$1.7180 on July 4, the highest level since October 2008. It weakened 0.4 percent to ￡0.7951 per euro.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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