Asian FX steady ahead of key cenbank decisions

17 Oct, 2024

BENGALURU: Asian currencies recovered some ground on Wednesday, led by the Indonesian rupiah and Thailand’s baht, as investors braced for pivotal monetary policy decisions from Indonesia, Thailand, and the Philippines later in the day.

The rupiah advanced as much as 0.4% to 15,515 per dollar by 0311 GMT and the baht gained 0.3%, hitting their highest levels since Oct. 4. The Philippine peso was largely flat.

The dollar index, which measures the currency against six major rivals, was steady at 103.25, sticking close to Monday’s high of 103.61, a level unseen since Aug. 8. This kept a lid on gains for emerging market currencies.

Investors expect central banks in the region to ease monetary policies gradually. Last week, as widely anticipated, the Monetary Authority of Singapore maintained its stance for the sixth consecutive time since April 2023, while the Bank of Korea (BoK) reduced its policy rate by 25 basis points to 3.25%.

“In term of FX market reactions, I think market players are expecting gradual rate cuts from Asian central banks. So, rate cuts from BSP (Bangko Sentral ng Pilipinas) and BI (Bank Indonesia) might not hurt PHP and IDR that much,” said Poon Panichpibool, a markets strategist at Krung Thai Bank.

Despite inflation falling to 1.84% in Indonesia, its lowest level since 2021 and within the central bank’s target range of 1.5% to 3.5%, BI is expected to maintain current interest rates due to concerns over the rupiah’s more than 3% decline from the September peak.

The Bank of Thailand (BOT) is also expected to stay on hold and leave its one-day repo rate at 2.50% for the rest of the year.

“A ‘surprise’ rate cut at the October meeting with more dovish tone from the BOT could drive THB lower (USDTHB could easily break out 33.60-33.70 resistance zone),” Panichpibool said.

With inflation now below the target range of 2%-4%, the Philippine central bank is anticipated to continue its easing cycle that began in August, likely reducing the overnight borrowing rate by 25 basis points to 6.00% and potentially implementing another cut in December.

Stock markets in the region tracked a fall in US semiconductor names after chip equipment maker ASML cut its annual sales forecast.

The tech-heavy stock indexes of Taiwan and South Korea both fell 0.5%, with industry giants Taiwan Semiconductor Manufacturing Co and Samsung Electronics spearheading the declines in their respective markets.

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