INVESTORS are looking for the next policy domino to fall in Asia amid an escalating campaign against a resurgent dollar, after Indonesia used a surprise interest-rate hike to defend the rupiah.

The currencies of Japan, South Korea, Thailand, Taiwan, Malaysia, the Philippines and India are all trading within sight of multi-year lows, raising the odds for local authorities to take firmer action to stem the slide.

Indonesia’s unexpected monetary tightening this week demonstrates the precarious position of central banks as they grapple with the outlook of higher-for-longer US interest rates.

While China has been contending with a housing crisis, lacklustre growth and a weak yuan for months, countries like the Philippines also started the year with the prospect of rate cuts. But the picture shifted after sticky US inflation prompted traders to push back bets on the timing of policy easing by the Federal Reserve.

Both Japan and Taiwan raised interest rates in March, though their currencies have since declined. The yen weakened beyond 155 per dollar for the first time in more than three decades last week, fuelling risks of intervention by authorities. The rupiah likewise sank as much as 0.4% on Thursday despite Indonesia’s rate hike, spurring bets of more tightening to come.

The Bank of Thailand said on April 24 that the decision earlier this month to keep rates steady provides policymakers options to deal with unexpected global and domestic challenges.

The Reserve Bank of India similarly struck a hawkish tone at its April policy review, with economists pushing back their expectations for rate cuts, given growth rates of above 8%.

In the Philippines, the peso’s current slump may not spur a rate hike yet, according to the finance secretary who also sits on the monetary board. Authorities are also keeping a close eye on inflation as they risk missing their 2%-4% target for the third straight year in 2024. — Bloomberg / pic AFP