Carnage in Asian forex markets over Trump’s economic plans

SINGAPORE — The Malaysian and Indonesian currencies plunged to multi-year lows on Friday (Nov 11) on fears that higher United States interest rates under President-elect Donald Trump would spark capital outflows from the region.

Central banks from India to Indonesia stepped in to stabilise their currencies, as the ringgit hit its lowest in more than 12 years in offshore markets and the rupiah plunged the most in five years. The yen strengthened against all of but two of its 31 major peers on haven demand. The rupiah, Indian rupee and South Korean won were the worst performers.

“We are seeing carnage in Asian foreign exchange markets,” said Mr Robert Rennie, head of financial markets strategy at Westpac Banking Corp. in Sydney. “It’s providing a very strong reminder that the S&P 500 is not the correct barometer of Trump-driven risk aversion — it’s Asian currencies.”

The Singapore dollar fell to 1.4158 per US dollar, its weakest since Feb 4. In a statement, the Monetary Authority of Singapore (MAS) said it “stands ready to curb excessive volatility in the trade-weighted Singapore dollar if needed”. But the MAS said its monetary policy stance remains unchanged.

The ringgit’s one-month non-deliverable forwards (NDFs) lost 3.7 per cent from the previous close to 4.5395 per US dollar, its weakest since at least September 2004, according to Thomson Reuters data. In contrast, the ringgit spot barely moved at 4.2725 per US dollar with extremely thin liquidity. As a result, the dollar/ringgit’s NDFs premium over the dollar/ringgit spot increased to 0.2695, the widest since at least April 2008.

Malaysia’s central bank governor said Bank Negara Malaysia told banks in the country to take “temporary measures to calm the market”. “The situation now is result of speculative positioning ... The central bank has responsibility to step in,” Governor Muhammad Ibrahim said at a news conference held to announce economic growth and current account data.

The rupiah tumbled 2.5 per cent to 13,475 per dollar last night, its weakest since June 27 in Jakarta. It earlier dropped as much as 3 per cent.

The currency weakened after a few short-term investors rushed to the NDFs market to hedge, causing the contracts to drop significantly, said Mr Nanang Hendarsah, head of financial market deepening at Bank Indonesia. The monetary authority is already in the market to stabilise the rupiah, and does not see much fund outflows and expects the move to be temporary, he said.

The rupiah led declines in Asian currencies as sentiment toward emerging-market assets soured on speculation a Trump administration will enforce protectionist trade policies.

Mr Sim Moh Siong, senior currency strategist at Bank of Singapore, said: “The prospects of higher US interest rates is leading to capital outflow from the Malaysian and Indonesian bond markets. The risk of higher trade conflicts, at the same time, is hurting open markets like Malaysia more.” Nevertheless, he said a sustained weakness in regional currencies was unlikely, as the global growth environment was holding up.

Amid the volatility in recent days, moneychangers are seeing brisk business. By about 3pm yesterday, several moneychangers at Raffles Place told TODAY they have run out of ringgit.

A manager, who wished to be known only as Jessie, changed S$10,000 to ringgit. The 55-year-old said she had been tracking the rates over the last few days using an app. “I’m preparing to use it to pay for instalments for a housing loan in Malaysia ... and I travel to Malaysia quite often for work, so it makes a lot of sense,” she said.

Similarly, a 34-year old Malaysian, who only gave his name as Mr Yeo, took the chance to change S$3,000 to ringgit. “(The rate is) quite good today ... I think the sentiments from the US election results could have played a part ... (people) might be pulling out from investments,” he said.

Moneychanger Arshad Hassan, 34, who works at Sheen International Exchange, said he observed a spike in the number of customers asking about rates for rupiah and ringgit. The shop had to restock ringgit twice between 11am to 2pm. On the currency movements, he said: “I think people are panicking as they are not sure what is happening (in the markets) ... after Donald Trump won.” WITH AGENCIES