EMERGING MARKETS-Rupee jumps as central bank steps back, Asian stocks rally

By Shriya Ramakrishnan

Aug 25 (Reuters)India’s rupee opened around 1% above levels from a day earlier on Tuesday after traders reported a halt in a run of central bank interventions aimed at keeping the currency weak to support its stuttering economy.

Over recent weeks, banks have spotted interventions by the Reserve Bank of India to backstop the export sector as the nation struggles to emerge from the world’s third worst coronavirus outbreak.

The rupee <INR=IN>, which is about 4% on the year, jumped from opening levels of close to 75 per dollar to 74.24 rupees in early trade.

“If not for the RBI’s active intervention to absorb the inflows, INR would have traded much stronger than current levels,” Australian bank ANZ said in a note to clients after the moves on Monday.

“The RBI will likely continue to intervene though potentially not by as much as before, allowing the currency to appreciate into year-end.”

Elsewhere in Asia, stock markets were mostly higher as signs of progress in U.S.-China trade negotiations bolstered risk appetite, with export-focused markets leading the way after Washington and Beijing said both sides saw progress in discussions over their phase 1 trade deal.

South Korea’s KOSPI .KS11 jumped as much as 1.5% and the won KRW=KFTC rose 0.3% against the dollar, with sentiment also supported by a slowdown in domestic daily COVID-19 infections from a peak of 397 reported on Sunday.

Taiwan .KS11 and Singapore shares .STI gained about 1% each, while Thai shares .SSECwere 0.3% firmer.

In Indonesia, the rupiah IDR= advanced as much as 0.5% to a more than two-week high ahead of a bond auction later in the day, where the country’s finance ministry aims to raise 20 trillion rupiah ($1.37 billion) to fund its 2020 state budget.

“We expect demand for Indonesia government bonds to stay robust,” said Duncan Tan, an interest rates strategist at DBS.

“The recent plunge in FX-hedging costs also allows foreign bond investors to cheaply hedge the direct IDR exposure, and should be helpful to draw back in investors who may be concerned about IDR underperformance.”

Indonesian debt has been a favourite with foreign investors over the years due to their attractive yields, the highest in Southeast Asia.

But investors have preferred to stay at the shorter end of the curve recently, pushing the spread between five-year ID5YT=RR and ten-year ID10YT=RR debt to its widest since 2013.

“There is likely some amount of worries of higher inflation on the back of an expected expansion of Bank Indonesia’s balance sheet,” Tan said, adding that more liquidity is also being directed to shorter-tenor bonds.

Shares in Jakarta .JKSE were up about 0.8%.

Malaysian shares <.KLSE> bucked the trend, dragged down by losses for its medical glove makers as progress on coronavirus vaccines and treatments dented the appeal of the sector.

HIGHLIGHTS:

** Indonesian 10-year benchmark yields ID10YT=RR are down 0.7 basis points at 6.729%

** Top gainers on the Singapore STI .STI include Singapore Airlines Ltd SIAL.SI up 4.62% at S$3.85, Capitaland Mall Trust CMLT.SI up 2.66% at S$1.93, Jardine Cycle & Carriage Ltd JCYC.SI up ​ 2.59% at S$19.4

** Top losers on FTSE Bursa Malaysia Kl Index .KLSE include Hartalega Holdings Bhd HTHB.KL down 5.49% at 16.54 ringgit; Top Glove Corporation Bhd TPGC.KL down 5.23% at 26.46 ringgit;

Asia stock indexes and currencies at 0410 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

+0.00

+2.49

.N225

1.85

-1.04

China

CNY=CFXS

+0.14

+0.78

.SSEC

-0.19

10.79

India

INR=IN

0.00

-3.94

.NSEI

0.41

-5.38

Indonesia

IDR=

+0.27

-5.13

.JKSE

0.81

-15.55

Malaysia

MYR=

+0.13

-1.88

.KLSE

-0.28

-1.55

Philippines

PHP=

-0.02

+4.45

.PSI

-0.21

-24.11

S.Korea

KRW=KFTC

+0.30

-2.45

.KS11

1.45

7.56

Singapore

SGD=

+0.09

-1.79

.STI

1.30

-20.21

Taiwan

TWD=TP

+0.53

+2.54

.TWII

0.88

6.35

Thailand

THB=TH

+0.03

-4.84

.SETI

0.32

-16.36

($1 = 14,630.0000 rupiah)

(Reporting by Shriya Ramakrishnan in Bengaluru Editing by Shri Navaratnam)

((Shriya.Ramakrishnan@thomsonreuters.com; +91 8061822842 ;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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