RPT-WRAPUP 1-Vulnerable Indonesia hikes interest rates,others in region stay calm
WELLINGTON/JAKARTA, Sept 12 (Reuters) - Indonesia hiked interest rates in a surprise move on Thursday, signalling growing alarm over a rupiah currency that is Asia's worst performer of 2013, but other central banks in the region held steady ahead of a U.S. Federal Reserve meeting next week.
Bank Indonesia's increase in three key rates came on the same day that central banks in New Zealand, South Korea and the Philippines all decided that their economies were robust enough to withstand the Fed's expected move to begin tapering off its the super-easy money strategy adopted nearly five years ago.
Emerging markets have seen a flight of funds for the past few months as investors anticipated higher yields from U.S. treasuries, leaving exposed economies dependant on capital inflows to fund large current account deficits, like Indonesia and India.
Some economists said the Indonesian decision may be enough to slow the slide in the rupiah, now down around 16 percent this year. It firmed after the announcement.
"We believe that the current bout of currency volatility is nearing an end and that a prolonged reversal of capital flows is unlikely. As such, we think further aggressive rate hikes in Indonesia will be unnecessary," said Gareth Leather, economist at Capital Economics Asia.
"Nevertheless, uncertainty about the timing of eventual policy tightening by the (U.S.) Fed could trigger further bouts of volatility, prompting further rates hikes in Indonesia."
Central banks worldwide are waiting for next week's U.S. Fed meeting to gauge how much it is ready to slow its dollar printing presses and gradually bring to an end the era of plenty for emerging economies.