(Bloomberg) -- Some Asian authorities are already moving to guard their currencies while others are on standby, as US election-related volatility fuels a surge in the dollar that has put currencies across the region under pressure.
Bank Indonesia said it was ready to intervene in the currency, non-deliverable forwards and bond markets to smooth out any sharp swings. State-owned banks in China sold large amounts of dollars onshore to help support the yuan, according to traders. There are also signs that India’s central bank has stepped in to support the rupee. Bank of Thailand said it is closely monitoring the baht.
Bloomberg’s dollar gauge advanced 1.3% Wednesday after the election, hammering currencies across Asia — as well as others such as the Mexican peso — as traders bet that a return of former President Donald Trump would lead to a wave of protectionism that could strengthen the dollar. The Republican candidate’s strong showing so far has spurred traders to resume so-called ‘Trump trades’ that include a stronger greenback.
Traders are now on the look-out for further signs of intervention by Asia’s central banks and governments, with particular attention being paid to South Korea and the Philippines, which have previously stepped in to defend their currencies.
A $6 Trillion FX Pile Is Asia’s Shield From Resurgent Dollar
“I do think FX authorities will try to smooth their currency volatility in the case of outsized moves,” said Lemon Zhang, a currency strategist at Barclays Bank Plc. “For instance, the USD/KRW should see intensified resistance when the pair rises above 1,400.”
The trading performance of the Indian rupee — with a sharp spike when the local market opened followed by a period of relative calm — suggests the Reserve Bank of India intervened to defend the currency, according to Kunal Sodhani, a trader at Shinhan Bank India in Mumbai.
The RBI regularly intervenes to bolster its currency, which was trading at around 84.2 rupees per dollar during midday trading in Asia on Wednesday.
Every Asian currency weakened against the dollar in early Asia trading Wednesday, with the yen and the Singapore dollar leading losses.
--With assistance from Ronojoy Mazumdar.
(Adds BoT comment in second paragraph, updates pricing in third paragraph)
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