Asian currencies climb, with strong rupiah leading the way

Asian currencies climb, with strong rupiah leading the way

SINGAPORE (Dow Jones): Asian currencies are stronger against the U.S. dollar in late trading Monday with a surprisingly strong Indonesian rupiah leading the way, following the weekend election of reformist Amien Rais as the speaker of the People's Consultative Assembly, the country's highest legislative body.

The election of Rais - the high-profile leader of the National Mandate Party - is seen as another positive sign that Indonesia's presidential election process will go smoothly. The market believes Megawati Sukarnoputri, who leads the Indonesian Democratic Party of Struggle, will be elected president Oct. 20. The ruling Golkar Party's Akbar Tanjung is still favored to be elected speaker of the lower house of parliament.

At 0745 GMT, the U.S. dollar was trading at Rp 7,717, well down from Rp 7,970 in late Asian trading Friday.

"It's been a pleasant surprise to see the presidential election proceed as smoothly as the market appears to have been discounting, given the recent tension over the new security bill," said Ryan Padgett, treasurer at Bank Brussels Lambert in Singapore. The Indonesian government suspended Sept. 23 the introduction of a new security bill that would have given the military sweeping powers to quell civic unrest.

"You would've thought the various parties would all have some fairly robust lobbying on the streets of Jakarta by now," Padgett said.

If the presidential elections continue to be peaceful through October, he expects the U.S. dollar to test Rp 6,000.

"It is going to be a tenuous process, though; it's more likely that we'll see some jitters before all is said and done," he added.

The rupiah's rise against the U.S. dollar managed to overshadow the release Monday of the Bank of Japan's quarterly Tankan survey of business sentiment.

The Tankan's closely-watched business condition diffusion index for large manufacturers - which calculates the percentages of companies saying business conditions are good minus those saying they are bad - improved to minus-22 from minus-37 in the last survey in June.

Traders said the survey results were within expectations, and proved modestly bullish for the U.S. dollar against the yen. At 0745 GMT, the U.S. dollar was trading at Y105.87, up from Y104.96 in late trading Friday.

Also, the U.S. Federal Open Market Committee meeting Tuesday has left the market cautious with participants wondering if an interest rate hike is forthcoming.

"The market is beginning to think that there is going to be wave of tightening on a global basis," said Padgett.

"The market expects the Fed to tighten tomorrow or in November, it shouldn't have a huge impact on regional as long as the U.S. economy continues to grow strongly and pull in Asian exports."

Padgett said trade surplus currencies - either in emerging or developed economies - should flourish in coming months.

"We're looking for regional to continue strengthening. The market has become much less sensitive to interest rate differentials - as long as U.S. imports hold up, it will help Asian currencies," he said.

A currency strategist at a Singapore bank said central banks in Asia wouldn't react adversely to moderate strengthening of domestic currencies, given the already substantial weakening of regional versus the U.S. dollar.

At 0745 GMT, the U.S. dollar was trading at S$1.6910, significantly down from S$1.6987 late Friday. Traders said the trade-weighted Singapore dollar has been strengthening in line with other regional currencies, especially as the Thai baht and Indonesian rupiah improve.

The U.S. dollar was also trading at 40.35 baht, down from 40.575 baht in late trading Friday. On the Philippine dealing system, 40.56 pesos, down from 40.73 pesos Friday.

In Taiwan, the U.S. dollar was trading at NT$31.783, up from NT$31.73 late Friday. Against the South Korean won, the U.S. dollar was at 1214.1 won, down from 1215.5 won.

South Korea's Financial Supervisory Commission said Monday it will push forward the completion of a planned 20 trillion won bond-market stabilization fund to mid-October. The government has so far set up 11 trillion won in funds and had originally planned to set up the remaining 9 trillion won of the fund by the end of October.