Emerging markets: Indonesian rupiah hits highest level in December and shares gain for fourth day as Omicron fears ease


SINGAPORE, Dec 9 (Reuters): Most Asian currencies and equities rose on Thursday, extending gains for the second straight session amid waning fears about the economic impact of the Omicron coronavirus variant, while markets awaited US inflation data for clues on tapering.

The Thai baht, the worst performing currency in the region, firmed up 0.2% at 33.39 per dollar, its highest in two weeks, while the Malaysian ringgit and South Korean won appreciated as much as 0.4% each.

All regional equities, with the exception of India's Nifty 50 and Thailand benchmark, advanced as risk appetite improved upon signs that the Omicron variant may not have as adverse impact on the economic recovery as initially feared.

"This is fairly intuitive and expected in the context of (and exaggerated by) a harsh sell-off/risk off on Omicron last week, being met with encouraging news of early studies downplaying its severity and threat posed," analysts at Mizuho Bank said.

BioNTech and Pfizer said a three-shot course of their Covid-19 vaccine was able to neutralise Omicron in a laboratory test, an indication that booster shots could be key to protection against the variant.

The US dollar index edged up to 96.012, but traded near its one-week low as Omicron fears eased.

It could however find support if the US Federal Reserve moves to quicker normalisation of its pandemic-era stimulus.

Investors now await US inflation data on Friday for the effect it could have on the Fed's meeting next week where it is expected to announce it will accelerate tapering of its bond-buying programme.

In South-East Asia, the Indonesian rupiah firmed 0.2% to hit its highest level this month.

The 10-year benchmark bond yields slipped for a second day, down 8 basis points over the period after having risen nearly 20 bps for two weeks amid the Omicron-fuelled volatility in the markets.

In India, the Nifty 50 reversed direction to decline about 0.5%, a day after the central bank held rates steady to support economic growth, while in Thailand, shares shed 0.4% and slipped off their near two-week high.

Analysts at Bank of America expect Asean nations including Singapore, Indonesia, Malaysia, Thailand, and the Philippines to perform well next year on the back of strong domestic demand.

However, regional currencies are expected to be under pressure from US dollar strengthening.

"See US dollar strengthening against Asian FX into mid-2022, but Thai baht and Malaysian ringgit are the exceptions due to tourism reopening and commodity support respectively," they added in a note. - Reuters

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