SINGAPORE: The Indonesian rupiah hit a 3-1/2-year high on Friday, buoyed by heavy demand from foreign banks, and Asian currencies rose broadly as the dollar came under pressure following a dip in short-term US yields.
Market players said the rupiah rose despite dollar-buying intervention by Indonesia's central bank and climbed to a peak around 8,850, the rupiah's highest since June 2007.
The rupiah has pushed higher after Bank Indonesia raised interest rates earlier this month, soothing worries that the central bank may be falling behind the curve on inflation.
A Jakarta-based trader said "huge" orders to sell dollars around the time of the local fixing helped spur the renewed slide in the dollar against the rupiah.
"So market was given down, Foreign selling of course," the trader said, adding that the central bank was seen supporting the dollar at levels around 8,870 at one point.
Other market players said the dollar was pressured against the rupiah by heavy selling from foreign banks, said to be related to inflows into short-term Indonesian debt.
The rupiah's rise came on a day when Asian currencies climbed broadly, with currencies such as the South Korean won, Taiwan dollar and Indian rupee also posting solid gains.
"US yields turned lower with quite a bit of momentum and that's why the dollar is being sold across the board against Asian currencies," said a trader for a major Japanese bank in Singapore, referring to the previous day's drop in short-term US yields.
US short-term interest rates futures rose on Thursday after a bigger-than-expected rise in jobless claims reduced expectations the Federal Reserve will raise interest rates at the end of the year.
"When markets start factoring in a 30 percent to 40 percent chance of a (Fed) rate hike by December, it does make you wonder whether that may be going too far," said the trader at the major Japanese bank.
The dollar dipped against the peso before running into central bank intervention with market players saying the Philippine central bank (BSP) bought around $150 million.
Traders said Malaysia's central bank was detected bidding for dollars earlier near 3.3070, and this later triggered a modest round of short-covering in the dollar.
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