EMERGING MARKETS – Indonesian rupiah reverses course after unexpected rise in bank rates

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By Upasana Singh

August 23 (Reuters)The Indonesian rupiah reversed course on Tuesday to appreciate after the central bank unexpectedly raised its benchmark interest rate to support the currency and anticipate a risk of upside inflation, while other currencies Asians retreated for fear of recession.

Among other regional currencies, the Thai baht THB=TH depreciated by 0.3%, while the Philippine peso PHP= increased by 0.2%.

Bank Indonesia (BI), which had so far refrained from tightening policy, unexpectedly raised its benchmark policy rate by 25 basis points (bps) for the first time since 2018. Most analysts polled by Reuters expected the central bank to retain control. .

Mitul Kotecha, head of EM strategy at TD Securities, said BI was now starting to catch up.

“I think this won’t be the last of the tightening in Indonesia… definitely expect to see more hikes in the future as well,” he said, but added that the central bank would depend on the data at the moment. ‘coming.

The Rupee RDI=which traded down 0.2% throughout the session, reversed course to rise 0.3% after the decision, while Jakarta stocks .JKSE remained virtually unchanged, rising 0.7%.

Elsewhere in Southeast Asia, the Singapore dollar CAD= firmed 0.1% after the city-state’s main consumer price gauge rose in July at its fastest pace in more than 13 years, raising expectations of policy tightening of the Monetary Authority of Singapore (MAS).

The MAS has tightened its monetary policy three times this year, twice by surprise in January and July. The central bank is expected to meet next in October.

Market sentiment was further dampened by an aggressive policy stance from the US Federal Reserve and a renewed spike in energy prices in Europe which stoked recession fears.

The dollar index =USDwhich measures the greenback against a basket of major peers, traded flat near its six-week high amid growing fears of a hawkish message from the Federal Reserve’s Jackson Hole symposium later this week.

An overnight weakness in crude prices weighed on Malaysia, a net oil exporter. The ringgit MYR= fell 0.1% to its lowest level in more than five years, while the country’s benchmark .KLSE decreased by 0.4%.

South Korea won KRW=KFTC weakened 0.4% and hit a more than 13-year low even as the country’s foreign exchange authority issued a verbal warning against speculative trading in the dollar-won on Tuesday.

The Bank of Korea is expected to raise its key rate by 25 basis points on Thursday to tackle inflation which hit a nearly 24-year high in July.

Stock markets in the region were mixed, with the Philippine benchmark .PSI down 1.3% and leading the losses. Actions in Seoul .KS11 fell by 1.1%, while those of India .NSEI increased by 0.2%.

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The following table shows Asian currency rates against the dollar at 07:49 GMT.

COUNTRY

FXRIC

DAILY FX %

FX YTD%

INDEX

DAILY STOCKS %

INVENTORY YTD %

Japan

JPY=

+0.23

-16.10

.N225

-1.19

-1.18

China

CNY=CFXS

-0.16

-7.35

.SSEC

-0.05

-9.99

India

RNI=IN

+0.01

-6.92

.NSEI

0.20

0.98

Indonesia

RDI=

+0.29

-3.99

.JKSE

0.72

8.77

Malaysia

MYR=

-0.06

-7.17

.KLSE

-0.39

-5.49

Philippines

PHP=

+0.20

-9.09

.PSI

-1.28

-7.08

South Korea

KRW=KFTC

-0.42

-11.65

.KS11

-1.10

-18.21

Singapore

CAD=

+0.13

-3.37

.STI

-0.77

3.64

Taiwan

TWD=TP

-0.36

-8.33

.TWII

-0.98

-17.14

Thailand

THB=TH

-0.30

-7.80

.SETI

0.55

-1.99

(Reporting by Upasana Singh in Bengaluru; Editing by Krishna Chandra Eluri)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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