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Currency News

Most Asian currencies edge higher; rupiah sags

Most Asian currencies rose on
Thursday but uncertainty about what signals Federal Reserve
Chair Janet Yellen will send on U.S. interest rates in a
keenly-awaited speech kept gains modest. 
    The South Korean won edged higher as local
exporters sold the dollar, traders said. Many other regional
units eked out gains, including the Taiwan dollar and
Malaysian ringgit. 
    The Indonesian rupiah bucked the broader trend and
slipped against the dollar. At one point, the rupiah matched a
two-month low set on Wednesday.
    The rupiah has underperformed regional peers with a fall of
0.8 percent so far this week, a decline that analysts say may
have been exacerbated by dollar-buying by overseas bond
investors hedging their exposure to the currency.
    Still, Asian currencies were mostly stuck in range-trading
with moves mainly limited to position adjustment, said a trader
for a Malaysian bank.
    After recent comments from Fed officials took an upbeat view
on the U.S. economy, the focus now is whether Yellen will also
take a less cautious tone when she delivers a speech on Friday
at the Fed's annual conference in Jackson Hole, Wyoming.
    Unless Yellen delivers a hawkish surprise, such as strongly
hinting at a rate hike in September, traders and analysts say
the dollar is likely to retreat against Asian currencies.
    "I think the hunt for yield... will probably dominate
traders' sentiment early next week," said Stephen Innes, senior
FX trader for FX broker OANDA in Singapore.
    Yellen may try to nudge up market expectations for a rate
hike in December, while stressing that further increases in
interest rates would only occur very gradually, Innes added.
    "If we're only going to move up 25 basis points and then
that's it for the next three to four quarters, I don't think
that's going to be a big game-changer," he said. 
    The rupiah slipped to 13,270 versus the dollar at one
point, matching Wednesday's trough, the lowest since June 28.
    Although both the rupiah and Indonesian bonds have sold off
this week, official data contains little sign of foreign
investor outflows from the bond market.
    As of Tuesday, foreign investors held 676.64 trillion rupiah
 ($51.03 billion) in Indonesian bonds, up slightly from the end
of last week.
    Analysts said the rupiah's weakness this week may be partly
due to currency hedging by overseas bond investors, who have
piled into Indonesian bonds because of their high yields.
    Over the past three months, some overseas investors probably
bought Indonesian bonds without currency hedging as the rupiah
had been firm, said Kota Hirayama, senior economist for SMBC
Nikko Securities in Tokyo.
    Given the renewed focus on the possibility of a Fed rate
rise, such investors may be getting a bit nervous, he said.
    "There may be a bit of fear about holding bonds naked and I
think bond investors are increasing their (FX) hedges a bit,"
Hirayama said.
    In one-month non-deliverable forwards, often
used by overseas players to hedge FX risk, the dollar has gained
0.7 percent against the rupiah this week, putting the greenback
on track for its biggest weekly gain since late June.

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