BENGALURU (May 19): The Indonesian rupiah slid to another record low on Tuesday, leading declines in Asian currencies as domestic jitters kept investors wary ahead of Bank Indonesia’s policy decision later this week, where most economists now expect a rate hike.
The rupiah weakened to 17,730 per US dollar, extending Monday’s slide, as worries over the economic fallout from the Iran war compounded concerns over Jakarta’s spending plans, central-bank independence and capital-market transparency.
Continued Bank Indonesia (BI) intervention, a steadier domestic political backdrop and easing Middle East tensions will be needed to draw foreign inflows, said Krung Thai Bank strategist Poon Panichpibool.
Wednesday’s BI rate decision will test whether policymakers are ready to shift from intervention to monetary tightening, with currency stability now the top priority. “BI may need to hike rates again to curb rupiah weakness and support capital markets,” Panichpibool said.
A slim Reuters poll majority expects a rate hike, the first since April 2024. Just last month all 31 economists polled had forecast a hold through the year.
The Indian rupee also slid to a record low of 96.44 per dollar, taking its losses since the Iran war erupted in late February to about 6% as higher oil prices, rising US yields and subdued inflows deepened external-sector pressures.
US President Donald Trump said he had paused a planned attack on Iran to allow negotiations, helping stabilise bond markets after a two-day selloff and leaving the US dollar broadly steady.
Still, investors remained wary of export-heavy Asian markets exposed to higher global yields and weaker risk appetite. The South Korean won weakened 0.8%, while the Taiwan dollar slipped 0.3%.
Regional equities also came under pressure, with MSCI’s EM Asia equities gauge falling 1.5%, dragged lower by a 3% slide in South Korea’s Kospi and a 1% decline in Taiwan stocks.
Bucking the trend, Singapore’s equity benchmark rose 0.9% to a record high of 5,041.06 points, supported by strong April export data, AI-related electronics demand and the perceived security of the city-state’s bank-heavy, defensive market.
Singapore Airlines gained 1.9%, while beer-maker Thai Beverage rose 4.5%.
The Philippine peso slipped 0.06% to 61.65 per dollar, while Thailand’s baht fell 0.3% to 32.6 against the dollar.
Indian stocks climbed 0.39%, with IT shares jumping 3.5% on hopes of easing US-Iran tensions.
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