Asian currencies muted on robust dollar, rupiah at 4-year low

MOST emerging Asian currencies were subdued on Friday, with the Indonesian rupiah touching a fresh four-year low as the Federal Reserve’s reluctance to cut interest rates added pressure.

The Indonesian rupiah slipped as much as 0.3% to 16,475.00, the lowest since early April 2020, a day after Bank Indonesia (BI) kept its interest rate unchanged and said it would fine-tune other tools to stabilise the weakening currency.

The rupiah has lost more than 6% so far this year and is among the worst performers in the region.

“Looking ahead, BI will intervene actively in the FX market, optimise monetary instruments, and maintain strong yields to attract capital inflows,” Karinska Priyatno, a fixed income analyst at Mirae Asset Securities, said in a note.

“With corporate USD demand peaking in the second quarter and subsiding in third quarter, rupiah pressure is expected to ease in the near future.”

In the Philippines, the peso rose slightly on Friday, while equities declined 1.6% – their lowest level since mid-December – ahead of the central bank’s monetary policy meeting next week.

“(We are) expecting the BSP (Bangko Sentral ng Pilipinas) to hold its current monetary policy settings. Number one driver for the BSP to move, I believe, is still what the U.S. Fed wants to do,” said Ruben Carlo, chief economist at Manila-based Union Bank.

Most other Asian currencies have declined sharply so far this year. The Philippine peso, Thai baht, and Taiwan dollar have each lost more than 5%, while the Malaysian ringgit and Singapore dollar are down more than 2%.

The Thai baht inched 0.2% up as the country’s finance minister is expected to meet with the central bank governor to discuss the inflation target.

The Thai government has been pressurising the central bank to cut its interest rates in a bid to shore up Southeast Asia’s second-largest economy.

Elsewhere in the region, the South Korean won was down 0.2% while equities in Seoul lost 0.7%, breaking a three-day rally.

South Korea’s foreign exchange authorities said they agreed with the National Pension Service to expand a currency swap line to $50 billion from the current $35 billion to defend the tumbling won against the dollar. The won has fallen more than 7% against the dollar so far this year.

Shares in Taipei lost 0.7% for the day, but were on track for their best week since early March.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields rise to 7.152%

** India business activity grew faster in June, job creation at 18-year high, PMI shows

** Japan’s demand-led inflation slows, clouds BOJ rate hike path – Reuters