Indonesian Rupiah Drags Asian FX Lower, China Woes Linger

CURRENCY - SINGAPORE. Indonesia's rupiah led declines among emerging Asian currencies on Monday, as a strengthening dollar and concerns about China's faltering economic growth ahead of key data, which could bolster hopes for more direct policy stimulus from Beijing. The rupiah, the best performing Asian currency so far this year, weakened 0.8% against the greenback to its lowest level since March.

Indonesia's central bank intervened in the spot foreign exchange and domestic non-deliverable forward markets to prevent high currency volatility, according to an official.

"We are eyeing a prospective narrowing current account surplus and it may turn into a deficit next year, which is not a positive factor for the rupiah," said Fakhrul Fulvian, an economist at Trimegah Securities. Fulvian added that pressure on the rupiah is likely to continue until higher commodity prices pick up.

The South Korean won declined 0.6% and the Malaysian ringgit also weakened 0.6% to its lowest level in a month. China's yuan eased to a six-week low as weak new bank loan data for July deepened investors' concerns about the country's slowing growth, while property developers' recent repayment troubles curbed appetite for yuan assets.

New bank loans in July tumbled 89% from June, falling far short of analysts' forecasts. It came days after other data showed the world's second-largest economy slipped into deflation last month while exports and imports plummeted, adding pressure on Beijing to roll out more forceful stimulus measures. Figures on China's retail sales and industrial output are due on Tuesday.

"China's economic data (trade, inflation, credit) suggests anaemic activity numbers due for July tomorrow...Further yuan weakness could potentially mean one less anchor for regional FX," said Fiona Lim, a senior FX strategist at Maybank.

Meanwhile, the Philippine peso depreciated as much as 0.7% to its lowest level since November. Bangko Sentral ng Pilipinas (BSP) governor had said that the bank sees "no urgency" to change its monetary policy settings, while the deputy governor indicated that there may be some chance inflation returns to the 2%-4% target before the fourth quarter.

The BSP has kept interest rates steady at its last two meetings, after nine rate hikes totalling 425 basis points to curb inflation. The central bank's next rate-setting meeting is on Thursday.

Equities in the region also declined with those in Singapore and Manila falling 1.9% and 1.5%, respectively. Markets in Thailand were closed for a public holiday.

Elsewhere, Argentina's far-right libertarian candidate Javier Milei pulled off a huge shock in the country's primary election on Sunday, with the first results showing him in top spot, a rebuke to the main two political parties.