Rupiah leads advance in Asian market

Rupiah leads advance in Asian market

SINGAPORE (Dow Jones): Asian currencies were mixed late Tuesday, as caution before the Federal Reserve's meeting sapped whatever trading interest was left ahead of the yearend holidays, market watchers said.

Southeast Asian currencies were stronger, with the Indonesian rupiah leading the advance, while stock market weaknesses in the North pressured the South Korean and the New Taiwan dollar.

Trading was largely confined to position adjustments ahead of the Federal Open Market Committee meeting later Tuesday and the yearend, dealers said.

The Indonesian rupiah closed higher Tuesday as dollar selling by state-owned banks sparked the liquidation of long dollar positions by offshore participants.

After rising to an intraday high of Rp 9,390, the dollar closed at Rp 9,270 in Asia, down from Rp 9,370 Monday.

Dealers said they believed Bank Indonesia to have intervened by selling the dollar through state-owned banks.

"I think it was a year-end window dressing," said a dealer with a foreign bank. "It was effective as offshore participants jumped on the wagon squaring their dollar long positions."

Other dealers said the dollar selling may have been related to earlier asset sales by the Indonesian Bank Restructuring Agency.

Also dealers said holding the local currency looked attractive Tuesday after the interbank overnight rate jumped to 13.5 percent from 11.75 percent Monday due to rising year-end demand for liquidity in the money market.

Dealers expect the dollar to test Rp 9,250 Wednesday as they expect Bank Indonesia to take advantage of the market's thin trading volume to drive the U.S. currency lower.

Still, attempts to drive the dollar higher will lose steam at Rp 9,325, dealers said.

"A lot of traders have closed out their positions ahead of the Christmas, New Year period. Combined with the FOMC meeting, investors have taken a very cautious stance," said Peter Redward, a regional currency strategist at Deutsche Bank.

There is a growing belief the Fed might go further than just adopting a neutral stance and may choose an implicit easing bias or even cut interest rates at Tuesday's meeting, in the wake of signs the U.S. economy is slowing more abruptly than expected.

Thin liquidity exaggerated the currency movements, especially for the Southeast Asian units, dealers said.

In the Singapore currency market, participants seemed to have gotten over their disappointment over the city-state's lower-than-expected non-oil domestic export data for November, which sent the currency reeling past S$1.7400 Monday.

Inspired in part by the rupiah's gains, the Singapore dollar strengthened to S$1.7333, from S$1.7410 late Monday.

The U.S. dollar fell to S$1.7337 from S$1.7410 late Monday. The Singapore dollar's gains rubbed off on the Thai baht, especially when the U.S. dollar's support around S$1.7350 to S$1.7355 gave way, dealers said.

Stop-loss sell orders were triggered when the U.S. dollar fell below support around 43.25 baht to 43.30 baht, pushing the dollar even lower to 42.995 baht late in the day, compared with 43.38 baht late Monday, dealers said.

Tracking the baht's gains, the Philippine currency ended at 50.075 peso against the dollar, compared with Monday's close of 50.120 pesos.

The dollar finished at 1,209.2 won, up from Monday's close of 1,205.5 won.

Against the New Taiwan dollar, the U.S. currency closed at NT$33.081, up from Monday's close of NT$33.076.