Indonesian rupiah, Thai baht weaken ahead of cenbank rate decisions
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Bank Indonesia, Bank of Thailand expected to hold rates
Fed likely to cut rates by 25 bps
By Rajasik Mukherjee, Himanshi Akhand
Dec 18 (Reuters) -The Indonesian rupiah and the Thai baht weakened ahead of those countries' central bank policy decisions on Wednesday, while other regional currencies were largely muted and stock markets mixed as investors braced for an expected U.S. rate cut.
The rupiah IDR= fell 0.3% in its sixth consecutive session of losses and has stayed at its lowest level in more than four months.
While domestic factors such as softening economic growth and cooling inflation were conducive to a rate cut, the rupiah's near 6% drop against the dollar from a September peak is likely to prompt Bank Indonesia (BI) to keep interest rates steady at its policy meeting later in the day.
BI cut interest rates in September, just ahead of the U.S. Federal Reserve, starting its easing cycle, but since then has held its key rate at 6% to prioritize stabilising the rupiah.
Meanwhile, Bank of Thailand (BoT) is also expected to keep its key interest rate unchanged later in the day after a surprise trim in October.
Although, analysts are divided on whether the bank would hold or cut early next year amid concerns around the uncertainty of U.S. President-elect Donald Trump's proposed policies on trade tariffs and their effect on Southeast Asia's second-largest economy.
If BoT unexpectedly cuts policy rates or decides to hold but signals that more cuts are coming, there could be some depreciation pressures on the baht, said Poon Panichpibool, a markets strategist with Krung Thai Bank.
The Thai baht THB=TH was last down 0.3%.
Elsewhere in the region, the Singapore dollar SGD=, Philippine peso PHP= and the Malaysian ringgit MYR= all traded flat against a broadly stable U.S. dollar. FRX/
Equities were broadly mixed with South Korean stocks .KS11 gaining 0.9%, while those in Indonesia .JKSE and Singapore .STI retreated 0.4%.
The Fed is widely expected to deliver a 25-basis-point interest rate cut at the end of its two-day policy meeting on Wednesday, but the focus will be on how much further Fed officials think they will reduce rates in 2025.
A slower pace of rate cut would boost the dollar putting further pressure on emerging Asian assets while a faster pace of rate cuts would see Asian FX gain some footing.
"Worst case scenario for EM assets would be the Fed decides to hold the policy rate, upgrades the economic outlook and reduce numbers of rate cuts vs the September Dot plot," Krung Thai Bank's Poon said.
HIGHLIGHTS:
** Japan's exports rise faster than expected, helped by weaker yen
** Malaysia's November exports rise 4.1% y/y, above forecast
** BOJ leaning toward keeping rates steady on Thursday, according to sources
Asian stocks and currencies at 0427 GMT | ||||||
COUNTRY | FX RIC | FX DAILY % | FX YTD % | INDEX | STOCKS DAILY % | STOCKS YTD % |
Japan | JPY= | -0.05 | -8.13 | .N225 | -0.48 | 17.06 |
China | CNY=CFXS | -0.02 | -2.57 | .SSEC | 0.72 | 13.81 |
India | INR=IN | -0.03 | -2.02 | .NSEI | 0.14 | 12.14 |
Indonesia | IDR= | -0.37 | -4.50 | .JKSE | -0.49 | -2.06 |
Malaysia | MYR= | -0.02 | +2.78 | .KLSE | 0.24 | 10.07 |
Philippines | PHP= | +0.01 | -6.12 | .PSI | -0.29 | 0.51 |
S.Korea | KRW=KFTC | +0.04 | -10.34 | .KS11 | 0.93 | -6.61 |
Singapore | SGD= | -0.07 | -2.33 | .STI | -0.41 | 16.79 |
Taiwan | TWD=TP | -0.05 | -5.52 | .TWII | 0.22 | 28.66 |
Thailand | THB=TH | -0.25 | -0.20 | .SETI | 0.15 | -1.29 |
Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
Asian stock markets https://tmsnrt.rs/2zpUAr4
Reporting by Rajasik Mukherjee and Himanshi Akhand in Bengaluru; Editing by Stephen Coates
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