Asian FX muted; Indonesian rupiah, Philippine peso steady after rate decision
The Indonesian rupiah and the Philippine peso were largely unchanged on Thursday (22 June) after their central banks kept interest rates on hold as expected, while other Asian currencies were muted after the US Federal Reserve Chair's hawkish tone kept risk sentiment in check.
Bank Indonesia left its policy interest rates unchanged, as expected, extending its pause after inflation last month returned to within the target range for the first time in a year.
The Philippine central bank also kept its benchmark interest rate steady for a second straight meeting, but said it was prepared to leap into action if needed to sustain the downward trend in inflation.
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The Indonesian rupiah <IDR=> was flat, while the Philippine peso <PHP=> slipped 0.1%.
"Today's decision extends the Bangko Sentral ng Pilipinas's "prudent pause" to two meetings and we could see BSP on hold for a couple of more meetings if inflation continues to moderate and head closer to target," Nicholas Mapa, senior economist at ING said in a note.
Meanwhile, Fed Chair Jerome Powell in his remarks to lawmakers in Washington said the outlook for two further 25 basis point rate increases are "a pretty good guess" of where the central bank is heading if the economy continues in its current direction.
"Powell mostly repeated the messages he conveyed at the post-FOMC press conference, seen by the market as not adding to the Fed hawkishness and hence the muted reaction," OCBC analysts wrote.
Around 72% of investors have priced in a quarter-point Fed rate hike in July, with rate cuts seen at the end of the year or early next year, according to CME FedWatch Tool.
Against a basket of currencies, the US dollar index <=USD> was trading flat at 102.02.
The Thai baht <THB=TH> edged 0.4% lower, while the Singapore dollar <SGD=> and Malaysian ringgit <MYR=> weakened about 0.1%. Stocks in Bangkok slipped 0.9% while equities in Kuala Lumpur <.KLSE> rose 0.2%.
Elsewhere, the Russian rouble <RUB=> depreciated 1.1% while the Turkish lira <TRY=> fell 0.1%.
ING economists expect the Central Bank of Turkey to hike the one-week policy rate from 8.50% to 20%.
Markets in China and Taiwan were closed for a public holiday.
