The Indonesian rupiah hit a three-week low as investors dumped the country’s bonds after an interest rate cut amid a dour economic outlook and rising US yields, while most Asian stocks and currencies were headed for a weekly loss.
Benchmark US Treasury yields returned to a near one-year high hit earlier this week, putting pressure on riskier Asian stocks and currencies across the board.
A subdued greenback failed to lift the Thai baht , the Malaysian ringgit and Singapore’s dollar as they traded flat to lower on the day. Their respective stock exchanges, and were on track to shed 0.5 percent to 1.5 percent for the week.
The rupiah fell 0.4 percent, off about 1.6 percent from its Tuesday’s high, as a crippling COVID-19 infection wave led Bank Indonesia (BI) to trim rates by 25 basis points (bps) the previous day and downgrade its economic growth forecast for 2021.
Indonesia’s bonds, favored by foreign investors for their high yields, also suffered the brunt of rising US yields and in turn pressured the rupiah.
“Markets are looking past BI’s rate cut and are focusing on the uptick in US Treasury yields,” said Wei Liang Chang, a macro strategist at DBS Bank.
“With equity risk appetite softening and US yields staying firm, the rupiah could stay on the back foot, with sentiment further dampening after BI trimmed its growth expectations for the year.”
Indonesian 10-year benchmark yields were up 9.1 basis points to 6.624 percent, their highest since early November. The yields have jumped about 38 bps so far this week.
A bright spot in markets, South Korea’s stocks and won rebounded to close higher as the government mulled a fifth round of COVID-19 cash handouts.
