Indonesian stocks slid nearly 2 percent and the rupiah weakened as surging COVID-19 cases sapped risk appetite and squashed hopes that the central bank’s accommodative stance would allow equity markets to recover.
South Korea’s won fell for the fifth consecutive day in its worst week since March 2020, while other regional currencies were mixed, as investors further digested the US Federal Reserve’s hawkish signals this week.
Jakarta’s equity index shed as much as 1.9 percent and was set for its first weekly drop in four after Indonesia on Thursday reported its biggest daily rise in coronavirus cases since late-January.
Yields on Indonesia’s 10-year benchmark bonds climbed 8.5 basis points to a two-month high.
“New COVID-19 infections are rising rapidly again… Hospital occupancy rates have surpassed 75 percent in the capital, Jakarta, raising the prospect that restrictions will need to be tightened,” said Gareth Leather, senior Asia economist at Capital Economics.
The rupiah weakened for the fifth straight session and was on track to lose 1 percent this week as Bank Indonesia’s dovish stance and the Fed’s indication of raising rates earlier than expected heaped pressure on the currency.
Further complicating matters was news that hundreds of doctors and medical workers in Indonesia had been infected despite being inoculated, while analysts have also highlighted the slow pace of vaccinations.
The US Fed’s sudden turn on Wednesday prompted Morgan Stanley analysts to recommend cashing out of long positions in many Asian currencies, including the rupiah and the Malaysian ringgit, as their appeal for carry trade was dented.
