Emerging markets: Thai baht lower on high oil prices as Indonesian stocks fall further after Cenbank cuts GDP

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BANGKOK, April 19 (Reuters): Indonesian stocks extended losses on Tuesday after the central bank flagged risks from higher inflation and cut its forecast for annual economic growth, although it was expected to leave rates d interest at record levels.

Shares in Jakarta fell 1.1% at 0831 GMT and were on track for their worst day since Feb. 24, while the rupiah strengthened 0.2%, outperforming peers in the region.

Bank Indonesia (BI) kept the benchmark 7-day inverted repurchase rate at 3.50% and said high commodity prices would support the country’s exports in 2022 and year-end inflation would remain. within its target of 2% to 4%.

“At this point, the BI can continue to hold its policy on hold, and it doesn’t have to follow the Fed in its hikes, because inflation is generally still under control and there is no massive pressure on the rupee in particular,” Khoon Goh said. , Head of Asia Research at ANZ Banking Group, Singapore.

The effect of US rates “hasn’t really translated into downward pressure on the rupiah at this stage, so as long as this situation can remain stable, BI can continue to maintain its hold policy,” Goh said. .

Yields on Indonesia’s 10-year benchmark bonds were at their highest level since September 2020.

Central banks in the region are under increasing pressure to follow the US Federal Reserve in its tightening policy as inflationary pressures intensify. A Reuters poll last week found analysts expect Bank Indonesia to raise rates in the next quarter.

“Central banks in the region must either participate or accelerate the pace of policy normalization,” Morgan Stanley analysts said in a note.

“Economies are now experiencing a much broader recovery while policy rates are still in crisis territory. Therefore, central banks across the region will need to calibrate policy to the state of the recovery.”

Most other stock markets in the region rose after China pledged to provide further stimulus to cushion the economic slowdown caused by its zero-COVID stance.

Thai stocks snapped a three-day losing streak to rise 0.7%, while shares in Singapore, the Philippines and South Korea gained between 0.6% and 1%.

Most emerging Asian currencies were weaker as investors pulled risky bets as they digested hawkish comments from St. Louis Federal Reserve Chairman James Bullard that propelled the dollar to a new two-time high. years.

Separately, the World Bank has reduced its global growth projections for 2022 due to the impact of Russia’s invasion of Ukraine.

The Singapore dollar, Philippine peso and South Korean won fell 0.2% each.

The Thai baht fell 0.2%. A recent surge in oil prices has put pressure on the energy-sensitive currency.

Thailand’s central bank said on Monday it had further eased foreign exchange regulations to facilitate capital movement and risk management amid currency volatility.

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