Asian currencies: Rupiah lingers near three-decade lows

BENGALURU: Indonesian equities rallied 4% on Wednesday after a period of relentless selling on worries over the country’s growth outlook and fiscal stability, though market participants cautioned the recovery might be short-lived.

Sharp gains in banks across Southeast Asia, particularly Bank Central Asia and Bank Rakyat Indonesia, propelled the MSCI index of ASEAN equities by 1% to its highest level in more than two weeks.

The two Indonesian banks account for roughly 6.7% of the index, while Indonesia’s overall weight in the index is 15%.

Jakarta’s benchmark index rose to its highest in more than a week, extending its recovery into a second session after hitting its lowest point since September 2021 earlier this week.

The rupiah, one of the worst-performing emerging market currencies globally, was last trading at 16,585 per US dollar after the central bank intervened on Tuesday to shore it up from a near 27-year low of 16,640.

A Bank Indonesia official did not confirm any intervention on Wednesday but said the central bank was ready to do so with the rupiah not far from its 1998 lows.

Investor confidence in Indonesia has faltered as President Prabowo Subianto’s spending plans have stoked worries about the country’s fiscal health, while the launch of a new sovereign fund has raised concerns over potential political interference.

“This rebound feels more like a valuation-led bounce in oversold names than a shift in fundamentals; a tactical rally, not a structural one (yet),” said Mohit Mirpuri, a fund manager at Singapore-based SGMC Capital.