SINGAPORE: The Indonesian rupiah hit its lowest level in nearly eight months on Tuesday and most Asian currencies were set for monthly losses, having taken a hit as investors position for an eventual rise in US interest rates.
The rupiah fell to as low as 12,230 versus the dollar , its lowest level since early February.
Asian currencies had a mixed day on Tuesday, with some getting a bit of a respite from recent selloff.
Still, most were on track for monthly losses, having come under pressure as investors positioned for the possibility that the US Federal Reserve could raise borrowing costs faster than expected once it starts raising interest rates, which many investors expect will begin in the second quarter of 2015.
The dollar has climbed 4.2 percent versus the rupiah in September, putting the Indonesian currency on track to becoming the worst performing emerging Asian currency this month.
In addition to the dollar's strength, the rupiah has been hit by concerns over political uncertainty.
The rupiah has extended its losses after Indonesia's parliament on Friday approved a measure ending direct elections for governors and mayors, a move president-elect Joko Widodo criticised as a "big step back" for democracy in the country.
Increases in US borrowing costs and bond yields can dampen the appeal of higher-yielding currencies and assets.
Amid the market's focus on the outlook for US monetary policy, market volatility is likely to persist, the Philippine central bank governor said.
"The volatility, the uncertainty are likely going to continue although the fundamentals are sound," Bangko Sentral ng Pilipinas Governor Amando Tetangco told Reuters.
"Again, our policy is going to be the same; we will allow the market to determine the (peso-dollar) exchange rate but we will always be there to ensure that we don't see excessive volatility in the exchange rate," Tetangco added.
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