Asian FX, stocks rally; Indonesian Rupiah surges on surprise rate hike

Emerging markets: Emerging Asian currencies experienced gains on Wednesday, with the Indonesian Rupiah receiving a notable boost from the central bank's unexpected rate hike. Concurrently, Taiwan and South Korea led the surge in equities, inspired by positive cues from Wall Street.

The Indonesian Rupiah advanced by 0.5 per cent following Bank Indonesia's (BI) surprise decision to raise interest rates by 25 basis points, aimed at shoring up the currency amidst risk aversion-linked selling and a delay in anticipated US rate cuts. BI's move defied expectations, with only six of 35 economists in a Reuters poll predicting a rate hike from the previous 6.00 per cent seven-day repo rate.

Fakhrul Fulvian, economist at Trimegah Securities, noted, "Today's rate hike is to be perceived as a positive for IDR, showing BI's commitment to stability." He stressed the importance of managing expectations, stating, "If we are to have (BI) rate cuts later, the expectations have to be on the hawkish side to ensure lower inflation and better external balance to come later this year, and vice versa."

After hitting a four-year low last week, BI intervened more assertively "to maintain market confidence."

In addition to the Rupiah's gains, other regional currencies strengthened as the US Dollar softened on news of cooled US business activity in April, potentially giving the Federal Reserve flexibility on interest rates.

The South Korean Won appreciated by 0.8 per cent, while the Philippine peso snapped an eight-session losing streak to gain 0.4 per cent.

Meanwhile, regional stock markets continued their upward trajectory, with Taiwan surging by 2.9 per cent and South Korea advancing by 2.1 per cent.

In Wall Street, optimism prevailed as investors analysed corporate earnings. Tesla's shares particularly soared following its announcement of new models.

The Philippines stock index rose by as much as 1.4 per cent, while Indonesian shares added up to 1.1 per cent.

Globally, investors are eagerly awaiting US first-quarter gross domestic product data on Thursday and PCE inflation data on Friday for insights into the Fed's rate outlook.

In Malaysia, March inflation data is scheduled for release on Thursday, with expectations of a year-on-year figure of 2.0 per cent, compared to 1.8 per cent in February. The Malaysian Ringgit inched up by 0.1 per cent, while shares climbed by 0.7 per cent.

The Vietnamese Dong edged 0.1 per cent higher, cautiously distancing itself from last week's record low.

(With Reuters inputs.)