* Rupee, rupiah hit after Brazil tightens capital controls
* Indonesia cbank says studying not considering capital curbs
* Taiwan cbank: some “hot money” gone, eyes remaining $11 bn
* India says watching capital inflows, no concern for now
* Market jitters follow Brazil’s move
By Manoj Kumar and Muklis Ali
NEW DELHI/JAKARTA, Nov 19 (Reuters) - Indian and Indonesian currencies came under pressure on Thursday as Brazil’s latest attempt to curb foreign inflows into its soaring currency fanned fears more Asian nations may slap controls on capital flows.
Taiwan’s central bank governor seized the opportunity to instil in speculators further doubt about betting on gains in the local currency, while India played down the need for immediate action, but both said they were closely watching “hot money” flows.
With Western economies still crawling out of recession and interest rates at or near historic lows, funds have been flooding into faster-growing emerging markets. Concerns that inflows were driving currencies to levels that undercut exporters and financial markets to dizzying heights prompted some, including Brazil and Taiwan, to impose controls.
Brazil, the world's eighth biggest economy and a member of the BRIC quartet of emerging powers that also includes Russia, India and China, wants to put the brakes on its real BRBY, which has gained about 36 percent this year against the U.S. dollar. [ID:nN18128104]
Officials across emerging markets also worry that a sharp reversal of inflows could wreak havoc in local financial markets and economies.
Indonesia, Southeast Asia’s largest economy high up on global investors’ hot picks list, mooted curbs on foreign ownership of short-term central bank debt earlier this week only to later play down the likelihood of such a step after the mention of controls spooked markets.
Asked whether Bank Indonesia was considering curbing foreign ownership of such debt, senior deputy governor Darmin Nasution said: “We are not considering it, but studying it. Those are different things.”
FOCUS ON SHORT-TERM DEBT
A source with knowledge of Bank Indonesia’s study told Reuters the authority was looking into limiting foreign ownership of the shortist one-month central bank paper, a move designed to encourage foreigners to invest in longer maturities. [ID:nJKB00327] [ID:nJKB003276]
However, the currency was on the back foot again on Thursday after Brazil overnight tightened its rules to plug a loophole that had allowed players to avoid a 2 percent tax on foreign investment inflows, sending ripples through emerging markets.
The rupiah fell just over 1 percent to 9,510 to the dollar, even as the central bank was seen selling dollars to support the local unit. In offshore non-deliverable forwards (NDFs), the rupiah also fell.
In India, the news of Brazil’s latest effort and a report, later denied by the authorities, that the government may restrict foreign borrowing by its companies also put the rupee currency on the defensive.
“After Brazil last night, there are fears that others in Asia might follow suit,” a senior dealer with a foreign bank in Mumbai said.
Finance Secretary Ashok Chawla denied a newspaper report that the government planned to set quotas on corporate foreign borrowing and played down any immediate threat from capital inflows.
“As of now it is not a cause of concern. As the situation evolves we will see what needs to be done,” Chawla said when asked if the government planned to tax capital inflows. [ID:nDEL296681]
Foreign investors have bought more than $15 billion of local equities in 2009, after selling $13 billion in 2008, helping send Indian stocks more than 75 percent higher.
Taiwan, which keeps its dollar TWD= on a tight leash via frequent central bank intervention and earlier this month banned foreigners from putting money into time deposits, noted that some of the speculative money has already left the country.
Central bank governor Perng Fai-nan told the parliament that out of some T$400 billion ($12.44 billion) parked by foreign investors last month, T$50 billion had been pulled out and that the authority would watch the rest closely. “We hope the level of (hot) money will fall further,” Perng told legislators on Thursday. ($1=32.16 Taiwan Dollar)