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The Indonesian rupiah hit a more than six-month low on Thursday while the South Korean won snapped a three-day winning streak after both countries’ central banks shocked investors by eschewing widely anticipated interest rate calls.

The rupiah slipped 0.4% to 16,383 per dollar, a level not seen since early July last year, extending a decline from the previous day when Bank Indonesia slashed its benchmark interest rate by 25 basis points, against expectations of no change to policy.

“The surprise decision to pivot back to rate cuts in the face of FX pressures seems abrupt and incongruous with BI’s prioritisation of IDR stability over the past two years,” analysts at Barclays said. They expect the rupiah to test the 16,500 mark by the end of the first quarter.

Jonathan Koh, Asia economist and FX analyst at Standard Chartered, said BI’s retention of the language on maintaining rupiah stability “may allay some, but not all, concerns over whether it is more focused on supporting growth or keeping the IDR stable.”

“Even if BI remains focused on attracting USD inflows, investor conviction to long IDR versus the USD may be soft. Moreover, foreign bond positioning is already neutral.”

The South Korean won declined 0.2%, slipping from a one-week high, after the Bank of Korea held interest rates unexpectedly against economists’ expectations of a quarter-point cut.

Foreign exchange risks could be a concern for the Bank of Korea, Maybank analysts said. “Regardless, upside risks remain for USDKRW given US tariffs threats linger on the horizon.”

Indonesia’s rupiah hits over 5-month low ahead of rate decision

The surprising decision by the BOK and BI underscores challenges faced by Asian central banks as they try to spur growth and defend their currencies against a towering dollar while preparing for tariffs from the incoming administration of US President-elect Donald Trump.

Equities in Seoul, however, rose 1% to a nearly one-week high.

Most other Asian currencies found support from a depreciating dollar which stood just under recent peaks after cooling US inflation data knocked down bond yields.

An index of emerging market currencies edged higher, continuing on its recovery path from a six-month low touched earlier in the week.

While a rate cut from the Federal Reserve in the January 28-29 meeting is still unlikely to happen, markets are pricing in a rate cut in June this year.

A resilient economy, the threat of broad tariffs on imported goods and mass deportations of undocumented immigrants - actions that are deemed inflationary - had led the Fed to project a shallower rate-cut path this year.

Singaporean equities rose 0.7%, its first gain in six sessions, while stocks in the Philippines advanced 1.3%.

Taiwanese stocks leapt 2.6% ahead of the earnings report from the largest contract chipmaker in the world, Taiwan Semiconductor Manufacturing Co, that is expected to post a jump due to surging demand.

Elsewhere, the Israeli shekel rose to its highest level in a month after news of a ceasefire agreement between Israel and Hamas.

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