(March 20): The Indonesian rupiah was steady on Wednesday after the central bank stood pat on interest rates, while most other Asian currencies slipped ahead of the US Federal Reserve’s monetary policy decision.
The rupiah was flat at 15,710.0 per US dollar, after the Bank Indonesia (BI) maintained its key policy rate at 6%, in line with efforts to maintain stability of the currency and control inflation.
“With the IDR remaining broadly range-bound since the middle of January, there was little reason for a resumption of rate hikes, unlike in October last year when the currency weakened visibly,” Barclays said in a note.
The brokerage said it continues to expect BI to wait for the Fed to cut rates first, expects the central bank to reduce its policy rate by 27 basis points in 2024 starting in June.
Separately, the Philippine peso fell 0.6% and led declines in other Asian currencies, while the Taiwanese dollar slipped 0.3%.
Stocks in South Korea jumped 1.3% while Singapore stocks added 0.1%.
Focus is now on the Fed policy meeting due later in the day where the risk is that its economic projections could signal just two interest rate cuts, down from three, or a later start to easing.
“The next step for the Fed is still a cut and a less restrictive rates environment,” said Christopher Wong, a currency strategist at OCBC.
A Fed rate cut in June would open the door for central banks in Asia’s emerging markets to start lowering their key rates given the progress on inflation, said Alex Loo, a macro strategist at TD Securities.
The Chinese yuan was flat while stocks in Shanghai jumped 0.6%. The country’s central bank left its benchmark lending rates unchanged, as widely expected.
Elsewhere, Malaysia’s central bank called for an acceleration of structural reforms to ensure long-term strength, with economic growth set to benefit from a recovery in exports and robust domestic spending this year.
Kuala Lumpur stocks slipped 0.5% while the ringgit, which is down 3.1% this year despite recovering from a 26-year low hit last month, slipped 0.2%.
