Rupiah, baht clobbered as policy uncertainty weighs


  • Forex
  • Wednesday, 02 Sep 2020

Dogged by worries over Indonesia's economic growth, debt and a difficult policy mix, the rupiah was set for its worst day since March 23, prompting Bank Indonesia to intervene to smooth the exchange rate volatility.

BENGALURU: Indonesia's rupiah was the biggest mover among emerging Asian currencies on Wednesday, weakening 1.5% after officials failed to quell concerns that a proposed new framework for monetary policy-making could undermine the central bank's independence.

Thailand's baht also slipped on the abrupt resignation of the country's newly appointed finance minister.

Dogged by worries over Indonesia's economic growth, debt and a difficult policy mix, the rupiah was set for its worst day since March 23, prompting Bank Indonesia to intervene to smooth the exchange rate volatility.

The central bank also affirmed its "accommodative" policy stance. An advisory panel to the government on Monday proposed the biggest shake-up in monetary policy decision-making in two decades, including a call for ministers to be given voting rights at Bank Indonesia (BI) policy meetings.

President Joko Widodo's assurances on Tuesday that BI would remain independent did little to lower concerns among foreign investors.

"Such a move would undermine BI's independence and could open the door to successive rounds of debt monetization, something that would rattle investor confidence and exert additional depreciation pressure on the IDR," Dutch bank ING said in a note.

Jakarta stocks fell 0.2% while the rupiah, already South East Asia's worst performing currency this year, saw its year-to-date losses swell over 6%.

In Thailand, the baht gave up 0.5% as the resignation of finance minister Predee Daochai after less than a month in the job sparked uncertainty while the government tries to support the tourism-reliant economy.

Daochai was appointed by Prime Minister Prayuth Chan-ocha to manage Southeast Asia's second-largest economy through the coronavirus crisis after a slew of cabinet resignations in July had paved the way for a major reshuffle.

Daochai's decision to step down "could create the impression that the cabinet may have a stability issue," analysts at Bangkok-based Phillip Securities said.

They added that finding a successor might be difficult as many prospective candidates approached last month had turned down the role and that this could delay state investments and stimulus measures.

Thailand's deputy prime minister on Wednesday said, however, that the government does not expect any big impact on operations from the resignation. HIGHLIGHTS:

Indonesian 10-year benchmark yields are up 7.4 basis points at 6.938%

In the Philippines, top index losers are Ayala Land down 3.18%, Universal Robina down 2.46% and Bank of the Philippine Islands down 2.3%

Top losers on the Singapore STI include Jardine Matheson down 1.65%, Capitaland Ltd down 1.43% and DBS Group down 0.96%. - Reuters

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rupiah , Bank Indonesia , baht , uncertainties

   

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