Rupee, rupiah fall on fear of outflows

SINGAPORE, May 4: The Indian rupee and the Indonesian rupiah fell on Friday, hit by growing fears over policy changes that could affect investments in the two countries, and were poised for consecutive weekly  losses.
Currencies in the rest of Asia also slid as investors remained cautious ahead of U.S. Non-farm payrolls data for April later on Friday after the world’s biggest economy reported tepid growth in the services sector.
The rupee slid to 53.78 per dollar, the weakest since Dec. 15, when the Indian currency hit a record low, and it is expected to move to the historically softest level of 54.30 eventually, dealers said.
The rupiah is also seen staying weak, although the Indonesian central bank was spotted selling dollars near the session low.
Earlier, the spread between onshore and offshore forwards in the rupiah widened to the largest level since late September, when the country suffered heavy  outflows.
‘INR and IDR are real underperformers within the Asian FX complex this year, with policy changes or potential changes making foreign investors nervous,’ said Westpac foreign exchange strategist Jonathan Cavenagh in  Singapore.
‘While the weakness in both currencies seems to reflect domestic factors, it doesn’t bode well for the broader Asian FX outlook in my view,’ Cavenagh said.
The rupiah and the rupee are the worst performing emerging Asian currencies so far this year, according to Reuters data.
The Indian currency has slid 2.2 percent versus the greenback so far this week, which would be the largest weekly loss since the week ended on Nov. 20, set to see a fi fth w eek of depreciation.
The Indonesian unit is also poised to suffer from a fourth week of slide.
In India, sustained uncertainty over a new tax proposal has been a major hurdle to foreign investors, although two government sources on Thursday said the country will not retroactively tax portfolio investments and will shift the burden of proving evasion on tax to authorities.
Jakarta will impose a new export tax on metal ores and prohibit the shipment of raw minerals unless miners submit plans to build smelters, in a decision likely to shake up mining in one of the world’s major metals exporters.
The spread of one-month offshore forward over the onshore widened to 102 points for the rupiah this week, indicating more foreign investors are hedging their exposure.
That would be the largest widening since week of Sept. 25 last year, when Indonesia suffered from heavy  outflows.
One-month dollar/rupiah non-deliverable forwards (NDFs) rose to 9,320, the highest since Nov. 28, on demand from model funds. Its next resistance is 9,350, the high of Nov. 25. If the level is cleared, it may head to 9,600, the high of Sept. 22.