KUALA LUMPUR: The rupiah’s volatility has gone through the roof in recent weeks – but then again, maybe it hasn’t.
While the rupiah has tumbled along with most other emerging-market currencies this year, traders say the recent spike in volatility isn’t as real as it looks. What has happened is that there’s an avalanche of sellers but very few parties wishing to take the other side apart from the central bank.
“Volatility is always good for trading but the direction seems to be only on one side so it’s not ideal,” said J. Suresh Sundaram, a currency strategist at CIMB Bank Bhd here.
The rupiah is now Asia’s most volatile currency, according to data compiled by Bloomberg, reclaiming a title it held before a series of central bank measures stifled trading last year.
Still, the renewed volatility is far from what traders were hoping for when markets were becalmed in 2017.
“We love volatility if we can hedge it and make money off it, but hedging EM risk in this climate is like playing Texas hold ‘em poker,” said Stephen Innes, head of trading for Asia Pacific at Oanda Corp. in Singapore.
“I hate floating money on a wing and a prayer without knowing if I can get out of my position without paying airport currency spreads.” — Bloomberg