Asian currencies: Thai baht, rupiah hold ground after rate pause

BENGALURU: The Indonesian rupiah and Thailand baht held their ground on Wednesday after local central banks, as expected, did not cut interest rates, while emerging Asian currencies and stocks struggled for direction as traders await cues on US rate cuts.

The rupiah held its 0.4% dip, while stocks in Jakarta were 0.4% higher near record highs after Bank Indonesia (BI) held rates, saying that the local currency has strengthened amid capital inflows and could further appreciate.

“We prefer BI to further lower SRBI (rupiah securities) rate faster before commencing a rate cut or do both,” said Fakhrul Fulvian, an economist at Trimegah Securities.

“Doing rate cuts without cutting down the rate of SRBI is ridiculous and (will) create confusion among market participants.”

The Bank of Thailand left its rates unchanged for a fifth straight meeting despite fiscal policy uncertainty amid a political transition.

The baht pulled back slightly from its 0.3% drop, while Thai stocks jumped 0.4%.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, thinks a rate cut is imminent.

“We continue to believe that members will cut twice before the end of the year, an above-consensus call that now implicitly means one 25 basis points cut each in October and December.”

Most Asian central banks are expected to hold rates until the Federal Reserve starts its easing cycle. That, currently, is expected to start in September and investors will parse Chair Jerome Powell’s comments at the Jackson Hole symposium later this week for further cues.

Before that, a large downward revision in US labour data and the Fed minutes are expected to back rate cuts. Both are due later in the day.

Among other currencies, the Malaysian ringgit, one of the best-performing Asian currencies this year, inched up to an 18-month high.

“We note that there is more positive idiosyncratic optimism towards the ringgit amid the government reforms (diesel subsidy rationalization), strong growth and more foreign investor interest,” said Maybank.

Equities in the technology-heavy Taiwan stock market plunged 0.9%, tracking a slump in Chinese peers after Walmart sold its stake in JD.com.

Stocks in Malaysia, Philippines and Singapore were lower ahead of the Jackson Hole symposium.

“Investors could be starting to be a tad cautious ahead of Jackson Hole and could be electing to take profits,” Maybank analysts noted.