Asian currencies: Indonesia rupiah touches near 1-yr high

BENGALURU: Indonesian equities hit a record high while most emerging Asian assets rallied on Monday, aided by positive investor sentiment over growing hopes that the US Federal Reserve will start cutting rates from next month.

Indonesia stocks were up 0.5% at 0658 GMT after hitting a record high earlier in the day while the rupiah strengthened 0.5% against the greenback. It hit its highest level since early September 2023 earlier in the day.

Last week, Powell hinted that the world’s most influential central bank would pivot towards a rate cut in September, sending the dollar lower.

“Powell’s ‘time has come’ keynote speech last Friday at Jackson Hole gave markets greater conviction to put on risks while selling the USD,” said Christopher Wong, currency strategist at OCBC.

In Asia, however, domestic concerns and external factors may prompt some central banks in emerging markets (excluding China) to delay monetary easing, Barclays analysts wrote in a note.

“Country-specific factors, be it financial stability risks (South Korea) or inflation (India) or the currency (Indonesia), provide more reasons to push back on policy easing,” it said.

Back in Asia, the Indonesian and Thai central banks held interest rates steady last week while the Philippine central bank cut its key interest rate earlier this month.

Malaysia’s central bank is set to announce its overnight policy rate next week, having held rates steady since May 2023, after delivering a cumulative 125 basis points in hikes over the previous year.

“Bank Negara Malaysia likely to keep rates on hold can also be giving the ringgit support at a time when we talk about easing elsewhere about the Fed and globally,” Maybank analysts said in a note.