THE Indonesian rupiah touched a near one-month high on Tuesday ahead of the country’s presidential elections, while most Asian equities rose as investors awaited a U.S. inflation report that could give more clues on the Federal Reserve’s rate cut timing.
The rupiah inched 0.1% higher to reach its highest level since Jan. 16, while stocks fell 0.9%. Indonesia is set to hold simultaneous presidential and legislative elections on Wednesday.
“The focus is on how much Prabowo, who has the largest support of voters according to the polls, can have the lead in order to prevent a runoff,” analysts at Sumitomo Mitsui Banking Corporation (SMBC) wrote.
Surveys have consistently shown Defence Minister Prabowo Subianto leading the presidential race, although his overall victory is far from certain because of Indonesia’s election rules.
“If he fails to win more than 50% of the total votes, a runoff election will take place in June. This means that political uncertainties will remain longer, which will weigh on IDR,” SMBC analysts added.
The stability of the rupiah has been a key concern for Bank Indonesia, with the central bank saying the room to cut rates is dependent on the currency.
The Thai baht rose 0.3% while the Singapore dollar inched 0.1% lower.
The market focus is on January’s U.S. inflation report due later in the day, which will likely provide further clarity on how soon, and by how much, the Fed could cut rates this year.
SMBC analysts, however, suggested the U.S. inflation data will likely have a limited impact on markets because it is unlikely to change traders’ views on the Fed’s first rate cut, which is now expected to occur in May or June.
Most Asian equities rose on Tuesday, with those in Malaysia jumping as much as 1% to their highest level since August 2022.
Stocks in Thailand and South Korea advanced 0.6% and 1%, respectively.
Philippine stocks rose 0.3%. The Bangko Sentral ng Pilipinas (BSP) is set to meet on Thursday to review its monetary policy.
Annual inflation in the Philippines accelerated at its slowest pace in more than three years in January, in line with the regional trend of slowing inflation, making a case for central banks to consider start interest rate cuts sooner.
Markets in China were still closed for the Lunar New Year holidays and are due to resume trade on Monday, Feb. 19.
Investors are waiting to see what Chinese authorities could do next to shore up the country’s battered stock market after appointing a new markets regulator just before the break.
HIGHLIGHTS
** Pakistan’s two largest political parties wrangle over who will be prime minister after an inconclusive election last week forced them to join forces
** India retail inflation eases to 3-month low but no rate cuts expected yet
** Thai Jan consumer confidence at 47-month high on support measures, tourism – Reuters