Indian rupee's sharp rebound against US dollar leads Asia FX gains, rupiah up before central bank meeting

Aug 29 2013, 15:19 IST
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The rupiah was the second worst-performing Asian currency with a 11.8 percent loss against the US dollar. Reuters The rupiah was the second worst-performing Asian currency with a 11.8 percent loss against the US dollar. Reuters
SummaryThe rupiah was the second worst-performing Asian currency with a 11.8 percent loss against the US dollar.

by the Federal Reserve due to India's and Indonesia's widening current account deficits, slowing economic growth and strong resistance to implementing much-needed reforms.

India and Indonesia have announced various measures in recent weeks to save their currencies, with little effect.

In Indonesia, the central bank raised interest rates and the government announced steps to reduce current account deficits such as a cut in fuel subsidy.

But those measures are not enough to support the rupiah yet, traders and analysts said.

"They should cut the subsidy more to reduce the current account deficits," said another trader in Jakarta.

WON

The South Korean won rose to 1,108.5 per dollar, its strongest since Aug. 9, on continuous capital inflows and exporters' demand for settlements. Offshore funds also chased the won.

The central bank earlier said South Korea saw significant capital inflows to its financial markets over the most of August.

The won found further support on hopes that Standard & Poor's may upgrade the country's sovereign ratings, traders' said. "The annual review meeting with S&P started yesterday and will last until tomorrow. As long as I understand, they release the result of such review meeting some two months later," Choi Hee-nam, the head of the Finance Ministry's international finance bureau, said.

But Choi declined to comment on the possibility of a rating change after the review.

The won is seen heading to 1,107.6, its June's high. The next level is seen at 1,103.9, a 200-day moving average, analysts said.

PHILIPPINE PESO

The peso gained on short-covering and as stocks jumped after data showing the second-quarter growth was stronger than expected.

But the Philippine currency gave up some of earlier gains on selling from foreign investors.

"Dollar's weakness right after the data was oddly enough," said a senior Philippine bank trader in Manila.

"Idea is still to buy dollar/peso on dips, given worries about the Fed tapering and emerging market contagion," the trader said.

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