(April 23): The Indonesian rupiah hit a record low of 17,315 per US dollar on Thursday as elevated oil prices and persistent fiscal and governance worries trigger capital outflows, while the Philippine peso briefly pared losses after a rate hike.
The Philippine peso trimmed some losses to trade around 60.36 a dollar immediately after the Bangko Sentral ng Pilipinas (BSP) raised its key interest rate to 4.50% to contain inflation.
However, the currency declined to its intraday low of 60.472 shortly after, loitering around its weakest point since April 6.
A minority of 12 out of 26 economists had predicted the BSP would deliver a quarter-point hike.
“The hike reflects heightened concern over a worsening inflation outlook, driven by higher global oil and fertiliser prices and the continued rise in core inflation,” said Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines.
Stocks in Manila were largely unfazed by the decision, trading flat as of 0713 GMT.
Asian countries, especially net energy importers such as Indonesia, India, the Philippines, and Thailand, have been hard hit by the Iran war, as the closure of the Strait of Hormuz and uncertainty around the US-Iran ceasefire have kept oil prices elevated for a prolonged period, raising inflation risks.
In Indonesia, the rupiah fell 0.8% in what could be its steepest one-day drop since Sept 9, with the abrupt ouster of influential finance minister Sri Mulyani Indrawati triggering a sharp sell-off.
The IDR’s move “looks like the result of a combination of pressures hitting at the same time: unresolved war risks, renewed oil pressure, Indonesia-specific sovereign and fiscal concerns, and still-fragile foreign positioning,” said Josua Pardede, chief economist at Permata Bank.
“If talks between the US and Iran truly restart and oil falls in a sustained way, IDR can recover.”
Bank Indonesia on Wednesday vowed to go all out to defend the “undervalued” currency and said it stood ready to adjust its policy as necessary to provide stronger support for the rupiah and keep inflation in check.
The rupiah has lost more than 3.5% since the war began in late February, making it the second-worst-performing Asian currency this year after the Indian rupee, which is down 4.5% so far.
Elsewhere, Asian currencies were broadly weaker against the US dollar. The Thai baht fell to 32.44, its lowest since April 8, the Indian rupee weakened past 94 for the first time in April, and Malaysia’s ringgit slipped to an eight-session low.
An MSCI gauge of global EM currencies inched lower to a seven-session low.
Stocks whipsaw
Equities across emerging Asia deepened their losses in afternoon trading. The MSCI EM Asia gauge scaled a record high before pulling back as stalled US-Iran peace talks sapped risk sentiment.
Stocks in Singapore fell 1% to their lowest since April 7, while those in Indonesia lost 1.5% in what could be their weakest session since April 2.
Thai stocks fell 1.5% to their lowest level since April 7.
Volatility was most pronounced in South Korea and Taiwan. The Kospi breached 6,500 points for the first time before falling 1.7% at one point in the session. The index recovered in afternoon trading to finish at a record close.
Taiwan’s benchmark stock index also scaled an all-time high of 37,971 points, but later pared its gains to end 0.4% lower.
Market participants are keeping a close watch on developments in the Middle East with the lack of progress towards renewed peace talks pushing oil prices above US$100 a barrel for the first time in two weeks.
Uploaded by Magessan Varatharaja
