Asian currencies fall, Indonesian rupiah hovers near 4-year lows

The Indonesian rupiah hovered near four-year lows on Wednesday, while other Asian currencies traded in the red as the Federal Reserve’s higher-for-longer monetary policy stance pressured regional assets.

Hawkish comments from Fed officials on Tuesday knocked down riskier Asian assets. Investors now await Friday’s personal consumption expenditures (PCE) price index – the Fed’s preferred measure of inflation – for any change to the rate cut outlook.

The U.S. dollar index <=USD>, which measures the greenback against a basket of major currencies, was trading slightly higher at 105.760 during late Asian trading hours.

A higher U.S. interest rate environment supports the dollar, pressuring emerging market assets.

Back in Southeast Asia, the Indonesian rupiah fell as much as 0.5% to 16,445.0 per dollar, hovering around its lowest level since April 2020, as a slew of domestic factors, in addition to U.S. monetary policy, continued to pressure the currency.

The rupiah is facing headwinds from higher foreign exchange demand from domestic companies and uncertainty related to the country’s fiscal plans.

“Near term, the rupiah could face further downward pressure. A move towards the Covid-low of 16,625 vs the dollar cannot be ruled out,” said Christopher Wong, an FX strategist at OCBC.

“Comments (last week) about the rupiah’s fundamental value below 16,000, recent worries about domestic fiscal plans and broad softness in Asian FX have further added to its softness.”

Elsewhere in Asia, the Japanese yen <JPY=> pared back some losses to trade flat, as of 0637 GMT, after the country’s central bank hinted at possible rate hikes in the near future.

The South Korean won <KRW=KFTC> shed as much as 0.3% on Wednesday. Its central bank flagged the possibility of downward pressure mounting again on the won, but vowed to step up monitoring of risk factors and stabilise markets as required.

The Philippine peso <PHP=> traded slightly lower ahead of its central bank’s monetary policy meeting tomorrow, where rates are expected to remain unchanged, a Reuters Poll showed.

The Taiwanese dollar <TWD=TP> lost 0.3%, while stocks <.TWII> gained 0.5%, boosted by tech shares rising in tandem with U.S. peers after Nvidia’s <NVDA.O>overnight surge.

The Thai baht <THB=TH> lost 0.3% while equities <.SETI>traded flat. Stocks in Jakarta <.JKSE> rose as much as 0.8%.

Among other emerging markets, the Mexian peso <MXN=> traded slightly lower, as of 0637 GMT, ahead of the central bank’s monetary policy meeting.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields ticks higher to 7.097%

** Steady dollar sends yen to the brink of 160

** BUZZ – Falling yuan may tip Asian currencies over the edge

** MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> up 0.2%