Complacency is a dangerous issue when taming Asia’s most volatile currencies

(Aug 14): Policy makers in Indonesia and Malaysia have been so successful in quashing currency volatility that this is breeding a new danger: complacency.

Traders are being deprived of the experience to cope when fluctuations inevitably return, according to PT Bank OCBC NISP in Jakarta. At the same time, companies may cut back on hedging, exposing themselves to potential losses, says PT Sinarmas Sekuritas.

Three-month historical volatility for Indonesia’s rupiah has slumped for four straight quarters, falling to a four-year low of 2.53% in May from as high as 16% in 2013. Ringgit volatility has shrunk by two thirds this year to 2.95%. The two currencies were previously the most volatile in Asia -- now they are the least after China’s yuan.

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