Rupiah Directionless after Rate Cut; Asia FX Gain Against Soft Dollar

FOREX. The Indonesian rupiah struggled for direction while shares in Jakarta extended gains after the central bank lowered interest rates on Wednesday, while currencies in emerging Asia traded higher against a weaker U.S. dollar.

Indonesia's currency, which was marginally higher ahead of the rate decision, was trading in a tight range. It was last 0.1% higher after having marginally eased. Stocks in the country extended gains to 1%.

Bank Indonesia lowered its benchmark interest rate by a quarter point, as expected, after it stood pat on rates in April.

The move came weeks after Indonesia reported slowest economic growth in three years and the rupiah strengthening over the past month.

The central bank said it needs to further boost domestic growth to mitigate the impact of U.S. tariffs and will keep intervening in the foreign exchange market to stabilise the rupiah.

"Rupiah stability coupled with signs of weaker growth momentum tilted the balance in favour of a 25bps rate cut," said Radhika Rao, senior economist with DBS.

"We expect the BI to reinforce their pro-growth stance by tapping available window to lower rates."

Elsewhere, the South Korean won hovered rose after the government pledged support towards the domestic pharmaceuticals sector against U.S. tariffs.

Equities in Seoul gained up to 0.9%, led by pharmaceutical companies while battery makers staged a rebound as U.S.

President Donald Trump failed to receive backing for his tax bill. Among other currencies, the Singapore dollar, its Taiwanese counterpart and the Thai baht gained between 0.3% and 0.4%.

"Investors are closely monitoring any development with respect to economic and trade announcements, and will avoid taking major positions prior to them in order not to be caught on the wrong side in case of unexpected headlines," said Massimiliano Bondurri, founder and CEO at SGMC Capital.

The Malaysian ringgit was the top gainer among Asian currencies, rising 0.7%. Stocks in emerging Asia were mixed, with shares in Manila and Taiwan adding 0.6% and 1.3%.

The Malaysian benchmark index was on track for its fifth-consecutive day of losses.

Meanwhile, oil prices climbed following a CNN report that said Israel may be preparing for a potential strike on Iranian nuclear facilities, citing new U.S. intelligence.

Southeast Asian countries including Malaysia, Indonesia and Vietnam are net importers of oil, and have been grappling with declining output and rising domestic consumption.