: Differing convictions in monetary policies #IndiaNEWS #Business <br>Overnight US Fed minutes also reaffirmed their tough stance on inflation, increasing the likelihood of a higher terminal rate.

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Differing convictions in monetary policies #IndiaNEWS #Business
<br>Overnight US Fed minutes also reaffirmed their tough stance on inflation, increasing the likelihood of a higher terminal rate. A hawkish RBI MPC stance will help counter the impact of any resultant jump in the US yields/ US dollar. That said, the policy preference is to keep the currency at competitive levels vs regionals.
The RBI mopped up net . 8 billion in December 2022, after . 4 billion in November 2022, which partly explains the INRs underperformance in late-2022 even as regional FX appreciated on a sliding US dollar. Concurrently, the outstanding forwards book has also risen to . 96 billion from [CO]. 2 billion in October, as intervention was conducted in spot as well as forwards and authorities remain keen to rebuild FX reserves. As a result, the INR REER slipped below 100 in January 2023, addressing valuation concerns vs key trading partners. In the near-term, with strong US data driving DXY higher, the RBI will seek to contain one-sided weakness in the rupee and keep intraday volatility in check.
Indonesia Rates: BI Governor to return for a second term
Indonesias President has nominated the incumbent Bank Indonesia (BI) Governor Perry Warjiyo for a second term, after his current term ends in May. This decision bodes well for policy stability and continuity, as Governor Warjiyo enjoys the confidence of domestic as well as international markets. While possible on legal grounds, this decision breaks from norm as most past governors have usually served one term.
The ruling partys majority in the parliament will pave the way for the nomination to go through smoothly. Current Finance Minister Indrawati Mulyani was rumoured to be as one of the potential contenders for this position, besides BIs Senior Deputy Governor, among others. For now, the benchmark rate is likely to be left on hold in March, with any unexpected bouts of volatility in the rupiah likely to be met by intervention efforts. A sharp realignment in the Feds terminal rate expectations might, nonetheless, bring precautionary hikes back in view.
( is Senior Economist at DBS Group Research)
Asia Rates: BOK unlikely to match Fed on 2023 hikes; Low 10 IndoGB yields<br>By Duncan Tan
Against rising short and long-term US rates, the front-end of Asia curves would be better anchored by Asia central banks expected earlier end to hike cycles (relative to US). Long-term Asia rates would however follow rising US to a larger extent (higher beta). Therefore, we think low-beta rates markets like Singapore and Korea could steepen relative to US, because of a more anchored front-end.
IDR Rates<br>10Y IndoGB yields have been very well-anchored despite much higher 10Y UST yields and flattening in the pace of foreign bond inflows, largely because of the strength of domestic bond demand.

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