Emerging Markets – Central Bank of Indonesia Withholding Rate; Asian forex gains as US yields ease as China cuts mortgage rates

JAKARTA, Jan 20 (Reuters): Asian emerging market currencies edged higher on Thursday as easing U.S. Treasury yields choked off dollar gains, while central banks in Indonesia and Malaysia left rates directors unchanged ahead of the key Federal Reserve meeting next week.

As inflation concerns herald a global shift to tighter monetary policy, primarily in developed economies, central banks across Asia appear to be slowing their pace to ensure their economies are stable and the recovery is not hindered.

China lowered its benchmark mortgage rate for the first time in nearly two years as economic data this week showed further weakening in consumption and a struggling real estate sector.

As expected, the central banks of Indonesia and Malaysia left their key rates unchanged.

Reuters polls conducted ahead of the meetings showed economists expected Bank Negara Malaysia and Bank Indonesia to wait until the second half of the year to start raising rates.

The rupiah and the ringgit gained 0.1% each and remained unchanged after the decisions of their respective central banks.

Shares in Jakarta gained 0.4%, while Kuala Lumpur was flat.

With some of the highest yielding debt in emerging markets, Bank Indonesia could come under pressure to launch its own tightening cycle to head off currency weakness and possible large capital outflows if the Fed starts signaling an acceleration in the pace of rate hikes.

This week, US Treasury yields jumped and investors bet that the Fed will have to act more aggressively to tighten monetary policy to stem runaway inflation. Seoul shares posted a five-day losing streak, up 0.7%.

Public subscriptions for LG Energy Solutions’ $10.8 billion initial public offering (IPO) closed on Wednesday, with investors bidding for a record 114 trillion won ($95.82 billion) of stocks, reducing market volatility.

In Singapore, shares continued to hover around 2019 highs as the city-state’s first Special Purpose Acquisition Company (SPAC) made its market debut. Vertex Venture Holdings, the SPAC and Temasek subsidiary, opened higher than its offering price. -Reuter

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