Indonesian stocks hit a record high on Tuesday among buoyant emerging Asian equities, while the rupiah led gains among currencies as investors looked out for further hints on a September rate cut by the Federal Reserve.
The MSCI International Emerging Market Currency Index rose 0.2% to touch a fresh record high, while the Indonesian rupiah gained as much as 0.5% to trade at 15,470 per dollar, hitting its highest since early January.
"We view the Asian currency rebound as a recovery of the losses from the Fed’s 'high for longer' rates stance in the first half of this year," senior FX Strategist Philip Wee from DBS wrote in a client note.
"There is scope for the South Korean won, Philippines peso and Indonesian rupiah to play catch up in recovering this year’s losses," he added.
Other currencies such as the Taiwan dollar rose 0.2%, while the Singapore dollar and the Philippine peso traded flat.
Investors will focus on the Jackson Hole symposium later this week, where Fed Chair Jerome Powell is likely to acknowledge the possibility of a rate cut in the September meeting. That could boost riskier Asian assets and drive a weakening trend in the dollar, with inflation also easing in most emerging Asian economies.
The dollar index drifted lower overnight, although it stayed steady during Asian hours at 101.96. "(EM Asia) central banks have room to cut interest rates.
However, they are not in a hurry as they are avoiding capital flow and exchange rate volatility and will likely only ease once U.S. policy interest rates begin easing," analysts from S&P Global Ratings said in a note.
Central banks in Thailand, Indonesia and South Korea are set to meet this week, where all three are expected to stand pat on rates, contrasting with the Philippines' central bank decision to slash its main policy rate last week.
Moreover, inflation prints from Singapore and Malaysia during the week are likely to set the tone for their respective central banks' stances.
Elsewhere, China left its benchmark lending rates unchanged as expected. The yuan traded flat while stocks fell almost more than 1%.
Among Asian shares, the Jakarta benchmark advanced as much as 0.9% to a record high, and up for the third straight day. Manila stocks climbed as much as 1.7%, nestled near their early April highs.
Others such as Singapore, Bangkok, Taipei and Seoul traded between 0.1% and 0.8% higher.
HIGHLIGHTS:
** "We're going nowhere" - Thai opposition figure says court interventions must stop
** Philippines raises $442 mln from reissued T-bond offer
** BOJ highlights rising wage pressure from structural job market changes - Reuters
