BENGALURU: Indonesia’s rupiah was set for its biggest weekly fall since late May on Friday, pressured by rising US Treasury yields, a stronger dollar and expectations that US interest rates will remain higher for longer.
The rupiah extended losses, weakening as much as 0.3 percent to 17,935 per dollar on the day. It has declined nearly 1 percent so far this week.
Bank Indonesia on Wednesday kept its benchmark interest rate unchanged at 5.75 percent, after raising it by a cumulative 100 basis points between May and June to support the weakening rupiah.
The central bank signalled it would rather support the rupiah through market-based measures as elevated oil prices and higher US yields pressure the currency.
Although the rate hold was understandable, “the market is looking for stronger signals that BI will prioritise rupiah stability,” said Lukman Leong, chief analyst at Doo Financial Futures.
The benchmark Jakarta Composite Index was down 0.6 percent on the day and more than 27 percent year-to-date.
Among other regional currencies, the Thai baht and the Indian rupee traded flat. The broader mood remained cautious as a sharp overnight rise in oil prices pushed 30-year US Treasury yields to their highest since 2004, while a stronger dollar continued to weigh on regional currencies.
Stocks in Thailand and the Philippines rebounded from the previous session’s losses, rising 0.4 percent and 1.7 percent, respectively, while equities in Singapore added 0.5 percent.
“Markets today appear to be in a holding pattern, with lighter trading volumes as several key Asian markets are closed for holidays, helping regional equities absorb the rise in oil yields without a sharp risk-off move,” said Gary Tan, portfolio manager for emerging market equities at Allspring Global Investments.