SINGAPORE, Oct 30 — The Indonesian rupiah led declines among emerging Asian currencies today as investors took profits on the view that an expected Federal Reserve decision to keep its stimulus intact was already priced into the market.

The rupiah fell as real money funds and leveraged funds sold it in non-deliverable forwards markets. The currency came under more pressure from month-end dollar demand and weaker bonds.

The Malaysian ringgit slipped as investors covered short dollar positions.

The greenback touched a one-week high against a basket of major currencies as investors further slashed bearish bets before the result of the Fed’s policy meeting later in the day.

The dollar had been under pressure before the meeting due to growing expectations that the US central bank will maintain its bond-buying programme through early next year.

These expectations had lifted most emerging Asian currencies, and investors today opted to pocket profits before the Fed’s decision due at 1800 GMT (0200 Malaysian time Thursday).

OCBC Bank said investors may focus on economic fundamental problems in Asia again.

“We caution that relative vulnerabilities within Asia have not dissipated overnight and recent Asian currency resilience has been a byproduct of structural dollar vulnerability, a stabilization of risk appetite levels, and resumption of some net portfolio flows,” OCBC Bank said in a client note.

“The recent outperformance of the hitherto distressed currencies within Asia in the past month may begin to look slightly saturated going ahead.”

Most emerging Asian currencies had enjoyed capital inflows as the recent US government shutdown cemented expectations that the Fed will keep its stimulus longer.

Last week, the rupiah jumped 2.7 per cent against the dollar, its largest weekly gain since June 2009, according to Thomson Reuters data.

The Indonesian currency was the worst performing Asian currency so far this year as the country was seen one of the most vulnerable to a Fed reduction in stimulus because of Indonesia’s sizable current account deficit.

Rupiah

The rupiah fell on month-end dollar demand from local companies and as most government bond yields rose.

The 10-year yield rose to 7.152 per cent from the previous session’s 7.019 per cent. The five-year yield advanced to 6.741 per cent from 6.622 per cent.

The forward onshore market, or Jakarta Interbank Spot Dollar Rate (JISDOR), was fixed at 11,161 per dollar, compared with yesterday’s 11,076.

Indonesia’s trade balance is expected to have swung into deficit in September on softer commodity prices, while inflation in October may have ticked up due to a weaker rupiah, a Reuters poll showed yesterday.

This data may put more pressure on the rupiah, traders said.

Ringgit

The ringgit eased in thin trading as interbank speculators rushed to cover dollar short positions.

But the Malaysian currency pared some of initial losses on demand from leveraged funds.

“Investors will wait for the Fed’s assessment of the economy, looking for a ‘downside risk’ phrase,” said a senior bank trader in Kuala Lumpur, adding that such an outlook may help the ringgit rebound. — Reuters