BENGALURU: Indonesia's rupiah gained more than half a percent on Friday, hitting a two-month high, driven partly by expectations that its central bank will raise interest rates later this month, while most other Asian emerging currencies remained subdued.
The rupiah appreciated as much as 0.6% to 14,670 per dollar level, its highest since June 12.
The currency weakened 4% in the first seven months of the year, but it is staging a recovery, having firmed more than 1% so far in August as the country's economy remains on track for recovery.
However, with inflation and the risk of a global recession - that could draw money away from riskier assets - both posing threats, there are growing expectations that Bank Indonesia (BI) could raise interest rate as it has been among the few laggards in the region which have yet to tighten their pandemic-era loose policy.
Analysts at Citi and OCBC are expecting BI to raise its benchmark seven-day reverse repurchase rate in a meeting later this month, with Citi seeing a 25 basis point hike.
However, Maybank and ANZ do not see the central bank rushing to tighten.
Meanwhile, a Reuters poll showed bearish bets on the rupiah had retreated significantly, in line with regional peers, as investor confidence in central banks containing inflation grew.
The Malaysian ringgit also rose about 0.2% as data showed the economy grew at its fastest annual pace in a year in the second quarter boosted by domestic demand and resilient exports.,
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The Singapore dollar was flat and the Taiwan dollar traded 0.1% lower.
The Philippines peso fell about 0.1%, ahead of next week's central bank meeting, which is expected to result in a policy rate hike of 50 basis points to dampen soaring inflation.
Multiple share markets across the region were also volatile, with the stocks in Singapore, Indonesia and China falling between 0.1% and 1%, while equities in the Philippines and Malaysia were up 0.2% and 0.5% each.
Asian stocks tracked Wall Street losses overnight and the yen fell on Friday as investors remained filled with uncertainty over how aggressively the Federal Reserve would raise interest rates to tackle inflation despite softer numbers earlier this week.
Thai markets were shut on account of a public holiday.
** Thailand's tourism-reliant economy likely gathered pace in Q2
** Singapore's Olam profit inches up, but higher costs weigh
** Indonesia's benchmark 10-year yield down to 6.951% - Reuters