Central banks in South Korea, Malaysia and Indonesia appeared to intervene in the foreign-exchange market Monday, continuing the fight to slow the rise in their currencies as better risk appetite bolsters purchases of the region's assets.
Big trade surpluses, world-beating economic growth and low interest rates in the U.S. and Europe have pushed a wall of capital into Asia-Pacific economies, driving up currencies to levels that worry the authorities in many export-reliant economies.
Several central banks have responded in recent weeks by selling their currencies for dollars in a bid to tame the rises and keep their economies competitive with those of their neighbors. They're looking over their shoulders at China, where a tightly contained rise in the yuan is putting other Asian exporters at a competitive disadvantage.
Beijing has let the yuan rise 4.4% against the dollar since unpegging the local currency from the greenback in mid-July. In the same period, the Korean won has climbed 11.4%, the Malaysian ringgit 7.8% and the Indonesian rupiah 5.6%.
Most recently, South Korea, Malaysia and Thailand were spotted intervening Thursday, while banks thought to be agents of the Monetary Authority of Singapore have also recently been seen selling the local dollar. On Monday the Bank of Korea sought to weaken the won at a 30-month high, Seoul traders said, estimating the bank bought $500 million around KRW1,085.
The intervention helped lift the dollar to KRW1,086.60 late in the session, but that was still down from late Friday's KRW1,091.10. “It's like the authorities' warning sign“ to keep the dollar well above the KRW1,080 support, said a trader at a local bank trader.
The head of the BOK's currency-market team declined comment. Seoul looks set to dig in. The government has notified several asset-management firms that it is withdrawing some of the funds it had placed with them, apparently to fund more dollar-buying intervention, the Korea Economic Daily said Monday, estimating the total at KRW2 trillion.
But the central bank and Finance Ministry, like their counterparts elsewhere in Asia, aren't trying to turn the tide in the region's currencies, just slow their advance.
“The weakness of the dollar against the other currencies, except the yen, is the main reason for the won's recent strength,“ said Byeon Ji-young, a currency analyst at Woori Futures.
Unless Seoul shares pull back strongly or risk aversion returns and scares global investors off Asian assets, she said, “Players will likely continue to place short orders on the dollar.“
Similarly, Bank Indonesia appeared to sell the rupiah, buying an estimated $50 million at IDR8,675. But the dollar still fell to IDR8,665 late in the day, vs IDR8,690 late Friday.
“The central bank didn't go all out in defending“ the initial level, said a local trader. Aldian Taloputra, an economist at Mandiri Sekuritas, expects the dollar to fall to IDR8,600 by the end of the year. Indeed, the central bank confirmed it's not trying to halt the rupiah's rising trend.
“We still see room for further appreciation of the rupiah,“ Bank Indonesia Deputy Gov. Budi Mulya told reporters. “The rupiah appreciation is still in line with our fundamentals. Besides that, all currencies in the region are in a strengthening trend, so it's a question of how authorities can maintain stability of their currencies.“
The Malaysian central bank appeared to combat the ringgit's surge, buying dollars at MYR3.0250, traders said. The dollar was around that level late in the day, below Friday's MYR3.0255.
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