Two of Asia’s worst currencies set for best monthly run in years

MUMBAI • The Indian rupee and the Indonesian rupiah, two of the worst performers in Asia, are fast narrowing their losses, and policymakers have gone from backstopping a rout to cheering the gains.

The two currencies are poised to end November with gains of more than 5% each, their best monthly advance since at least 2015.

Both surged yesterday as comments from US Federal Reserve (Fed) chairman Jerome Powell spurred bets of slower rate hikes, relieving pressure on emerging markets (EMs).

Stocks in both the countries also climbed, while bond yields slipped.

The Jakarta Composite Index soared 1.9%, the most in more than four months to make it the best performing Asian stock benchmark yesterday. India’s benchmark S&P BSE Sensex advanced as much as 1.5% to its highest level in almost two months.

The turnaround for the worst-hit EMs in Asia started earlier in the month when oil prices plunged, helping narrow the current-account deficit for the crude importers, and optimism started building over an easing of the US-China trade war.

The rupiah fell to its weakest since 1998 in October, while the rupee had dropped to record lows before rebounding.

These were “the currencies that were hardest hit this year, and have benefitted from a few things, most significantly the drop in Fed pricing and perception of increased dovishness”, said Dushyant Padmanabhan, a currency strategist at Nomura Holding Inc in Singapore.

“Lower oil prices have also helped, as have positive expectations on trade ahead of the Group of 20 China President Xi Jinping-US President Donald Trump summit.”

For Bank Indonesia (BI), it’s a big turnaround from the months of intervention and rate hikes as it sought to stabilise the rupiah and curb capital outflows. It’s now focused on providing room for the currency to keep strengthening, according to Nanang Hendarsah, the ED for monetary management at the central bank.

“Indonesia’s stocks and bonds are very sensitive to rupiah movement,” said Satria Sambijantoro, an economist at PT Bahana Sekuritas. “So, when they heard about Powell’s dovish comments — coupled with BI’s strategy to allow rupiah to appreciate, foreign inflows are rushing in.”

The rupiah advanced 1% to 14,383 against the dollar at the close yesterday, while the rupee gained 1.1% to 69.8750. — Bloomberg