Indonesia’s rupiah gained for a second straight session on Tuesday, a day after the country reported its fastest pace of growth in more than a year, while stocks lagged broader Asia on the prospect of more interest rate hikes by its central bank.
Southeast Asia’s largest economy, which reported third-quarter growth figures on Monday, has seen its currency gain 0.4% since then.
The rupiah is still down nearly 10% against the US dollar this year.
“The growth outlook is a bit more cloudy, but I think in Indonesia the economy can hold up relatively well and that’s because Indonesia is much more dependent on domestic demand than on external demand,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
Jakarta’s main stock index dipped 0.4% after three days of gains as analysts predicted strong growth may embolden Bank Indonesia (BI) to raise rates aggressively as it follows other global central banks in trying to curb surging inflation.
Kunal Kundu, an analyst at Societe Generale, predicted a “perfect storm” for Indonesia next year as commodity prices drop, the government reverts to the budget deficit’s legal limit of 3% of GDP, and BI stops debt monetisation.
“Even though the growth rate will likely drop over the next few quarters, we expect BI to raise the policy rate by an additional 100 basis points in the face of an aggressive Fed with a higher-than-expected terminal policy rate,” Kundu said.
Most other Asian currencies rose, with Thailand’s baht up for a third straight session, as hopes that China would ease its stringent COVID-19 curbs supported broader market sentiment and hit the dollar.
Regional equities were also mostly higher, with Taiwanese shares adding close to a percent, South Korea’s KOSPI up 1.1%, and Thai shares gaining 0.6%.
Most Asian currencies, stocks gain despite China’s COVID stance
Khoon Goh, head of Asia research at ANZ, said markets traded positively on hopes of China reopening despite officials over the weekend reaffirming a zero-COVID strategy.
“I think markets are of the view that the worst is probably past,” Goh said.
China will improve the its COVID prevention policy operates to make it easier for people to travel to and from the capital city, a government official said on Monday.
In the Philippines, the peso appreciated 0.6% after incurring losses on Monday.
The nation’s unemployment rate eased for a third month in a row in September and fell to a new low since the COVID-19 pandemic began.
Highlights:
** BOJ debated impact of future exit from easy policy amid rising prices
** Guangzhou’s COVID outbreak deepens as more lockdowns loom in China
** Vietnam central bank chief says it can provide liquidity to the banking system