May 18, 2018 / 6:17 AM / 10 months ago

EM ASIA FX-Most Asian currencies slip, Indonesia's rate hike fails to bolster rupiah

    * BI's hawkish tone does little for the rupiah 
    * Malaysian ringgit set for 7th weekly loss
    * India's rupee on track for sixth week of losses 

 (Adds text, updates prices)
    By Nikhil Nainan
    May 18 (Reuters) - Indonesia's rupiah weakened the most
among Asian currencies on Friday as the central bank's interest
rate hike failed to support the local unit as investors remained
more concerned about the emerging market's vulnerability.
    The rupiah and its regional peers have also been hit by the
dollar's sustained rally with surging U.S. yields and higher oil
prices intensifying pressure on most Asian currencies and other
emerging market assets.
    The rupiah weakened 0.7 percent to 14,145, despite
the central bank's efforts to support the fragile currency and
stem capital outflows with a 25 basis points rate hike.

    Bank Indonesia (BI) Governor Agus Martowardojo, who later
this month will be succeeded by Perry Warjiyowere, presented a
hawkish tone but investors shrugged off the rate hike and
possible further hikes.
    "Next month we will have a new BI governor so investors may
not be willing to price in this hawkish tone yet," Trimegah
Securities said in a note.
    Due to the rate hike, BI sees economic growth in 2018
weakening slightly but remaining within the 5.1 percent to 5.5
percent outlook. This follows weaker-than-expected first quarter
growth reported at the start of May.
    Southeast Asia's largest economy has seen $4 billion leave
its market over the past month, with its currency losing over 4
percent in value so far this year.
    "The persistent and rapid rise in U.S. Treasury yields could
unnerve sentiment and a subsequent sell-off in regional equities
could momentarily threaten the resilience of Asian currencies
ex-Japan," said Christopher Wong, a FX strategist with Maybank. 
    Oil prices firmed on rising demand and ongoing supply cuts
by OPEC and looming U.S. sanctions on Iran. Brent broke through
$80 per barrel for the first time since November 2017 on
    Asia is the world's smallest oil producing region, with
countries like India highly exposed to rising oil prices. The
rupee slipped 0.4 percent to 67.965.
    The Indian rupee has been the worst performing currency in
the region so far this year, shedding more than 6 percent, and
is set to extend losses for a sixth straight week.
    "The rupee and Indian bonds have been vulnerable to higher
oil prices adding pressures to the current account deficit and
inflation," DBS in a note said.
    The Malaysian ringgit also weakened to 3.976 a
dollar, a day after data showed annual economic growth slowed to
5.4 percent in the first quarter of the year. The currency is on
track for a seventh straight week of decline.
    Uncertainties over the new government's policies are
expected to weigh on the country's fiscal position.
    However, ING said firmer exports from rising oil prices
should support growth.
    "We continue to anticipate Malaysia's central bank
normalising policy, with a further 25 basis points rate hike in
the third quarter," ING added.
    DBS said it expects the rupee, the Philippine peso and the
rupiah are likely to remain Asia's worst performing currencies
this year. 
 Change on the day at 0501 GMT                          
 Currency                     Latest bid  Previous day  Pct Move
 Japan yen                    110.900     110.76        -0.13
 Sing dlr                     1.343       1.3420        -0.05
 Taiwan dlr                   29.899      29.906        +0.02
 Korean won                   1080.200    1081.2        +0.09
 Baht                         32.160      32.06         -0.31
 Peso                         52.392      52.251        -0.27
 Rupiah                       14145.000   14047         -0.69
 Rupee                        67.965      67.70         -0.39
 Ringgit                      3.976       3.967         -0.21
 Yuan                         6.369       6.3645        -0.07
 Change so far in 2018                                  
 Currency                     Latest bid  End 2017      Pct Move
 Japan yen                    110.900     112.67        +1.60
 Sing dlr                     1.343       1.3373        -0.40
 Taiwan dlr                   29.899      29.848        -0.17
 Korean won                   1080.200    1070.50       -0.90
 Baht                         32.160      32.58         +1.31
 Peso                         52.392      49.977        -4.61
 Rupiah                       14145.000   13565         -4.10
 Rupee                        67.965      63.87         -6.03
 Ringgit                      3.976       4.0440        +1.72
 Yuan                         6.369       6.5069        +2.17

 (Reporting by Nikhil Kurian Nainan in Bengaluru; additional
reporting by Fransiska Nangoy; Editing by Sam Holmes)
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