The Indonesian rupiah led a broader advance across Asian currencies on Friday as the US dollar retreated, with Treasury yields tumbling after lacklustre US economic data reaffirmed expectations for more Federal Reserve policy easing.
The rupiah strengthened as much as 0.7 percent to 16,395 per dollar, staging a notable recovery despite being the region’s worst performer year-to-date with losses exceeding 2 percent.
“The rupiah is playing catch up to the recovery of other Asian currencies, after an extended bout of underperformance, riding also on better sentiments in the onshore stock market,” said Radhika Rao, senior economist at DBS Bank.
With inflation still within the target range, policymakers have room to reinforce their pro-growth stance with an interest rate cut this month, Rao said.
Bank Indonesia will deliver its policy decision on Wednesday, and ING analysts anticipate rates will remain unchanged.
Other regional currencies also advanced, with the Malaysian ringgit and Philippine peso each gaining 0.3 percent, while the Thai baht and Singapore dollar both added 0.2 percent.
The South Korean won rose 0.4 percent, advancing for a fourth consecutive session in its third straight week of gains.
The currency broke through the psychologically important 1,400 level on Wednesday with a 1.8 percent surge following talks between South Korea and the US on May 5.
The sharp movement mirrors the Taiwanese dollar’s early-May rally, when it surged 6 percent over two days. On Friday, it edged up 0.2 percent, heading for a seventh consecutive weekly gain.
The week had kicked off optimistically after the US-China trade truce, which initially boosted the dollar, but momentum quickly faded, leaving most currencies trading sideways.
