BENGALURU (June 9): The Indonesian rupiah firmed sharply, and long-end bond yields jumped to over three-year highs on Tuesday after the central bank delivered an off-cycle interest rate hike to put a floor under the rapidly weakening currency.
The rupiah appreciated to 18,020 per dollar immediately after the surprise rate hike, but gave up those gains, settling at 18,050. Stocks trimmed gains immediately after the hike but later advanced as much as 5.5%.
Yield on 10-year bonds jumped to 7.517%, the highest since November 2022, highlighting investor concerns over the country’s fiscal outlook and persistent pressure on the rupiah.
Bank Indonesia (BI) raised interest rates by 25 basis points (bps) just days ahead of its scheduled policy meeting as the currency remained under mounting pressure and hit a series of record lows.
Even a hefty 50 bps hike in May and a US$12 billion (RM48.78 billion) drop in foreign exchange reserves this year, which the central bank uses to defend the currency, could not stem the rupiah’s recent losses. The currency is down 8% this year, among the worst performers.
“The BI felt they needed to act more forcefully, especially as they’re not able to continue to do intervention to the same extent, because their reserves have been falling,” Khoon Goh, head of Asia research at ANZ in Singapore, said.
Most analysts, however, stressed that restoring investor confidence would also require greater policy clarity, fiscal discipline and coordinated measures to address broader concerns over governance and the investment climate.
AI stocks rebound on Mideast pause
The MSCI EM Asia equities index advanced 4%, largely driven by stocks in South Korea and Taiwan, which now make up more than half of the index. A gauge tracking Asean stocks also jumped 1.5%.
Investors rushed into battered equities after Iran and Israel said they had halted attacks after an appeal from US President Donald Trump, although restricted oil flows through the Strait of Hormuz and a peace deal proving elusive remain a key overhang on the markets.
South Korea’s benchmark Kospi index ended the day 8.2% higher, recovering most of its losses from the previous session. Top chipmakers Samsung Electronics and SK Hynix gained 9% and 16%, respectively.
Taiwan’s benchmark index ended the day 2.8% higher, with the world’s top contract chipmaker, TSMC, adding 0.4%.
Both the tech-heavy gauges in South Korea and Taiwan are up 92% and 54%, respectively, for the year, with the former being the best-performing index in the world.
In Southeast Asia, Singapore’s FTSE Straits Times Index, Thailand’s SET index, and the Philippine benchmark index advanced more than 1% each, while stocks in Malaysia erased early gains to trade flat.
Currencies were largely muted: the Philippine peso, the Singapore dollar, and the Indian rupee inched higher, while the Thai baht slipped marginally to 32.875 a dollar.
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