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Rupiah weakens as hawkish pivot by major cenbanks pressures Asian FX

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  • Rupiah sees worst day in about 2 weeks
  • Indonesian bond yields spike to highest since July
  • Asian stocks fall on U.S.-China tensions; Shanghai off 1%

Dec 17 (Reuters) - Most Asian currencies eased on Friday as hawkish global central banks piled pressure on emerging market assets, with the rupiah leading losses a day after Bank Indonesia stood pat on interest rates.

The Malaysian ringgit , Singapore's dollar and the Philippine peso traded flat to lower, though most other currencies recouped earlier declines as the greenback lost some ground at the start of European trading session.

The Bank of England surprised markets on Thursday to become the first major central bank to raise interest rates since the beginning of the pandemic. A day before, the U.S. Federal Reserve had hinted at a faster bond tapering, potentially leading to three rate hikes in 2022.

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However, Asian central banks are in no rush to tighten policy as inflation pressures in the region are not as severe and the economic recovery is still at a nascent stage, with BI signalling on Thursday it would not hike rates to match the Fed.

"In the medium term, the drivers for a bullish U.S. dollar remain intact as the Fed is going to start the hiking cycle maybe as early as March," Citi analysts wrote in a note.

Prior going into Fed lift-off, emerging market currencies and debt typically do not perform well, they added.

Asian bonds received their smallest foreign inflows this year in November, with overseas investors selling Indonesian debt for a third straight month. read more

The rupiah slipped 0.3% on Friday to mark its worst session in nearly two weeks, while local bonds, which are favoured by foreign investors due to their high returns, were also sold.

Yield on the benchmark 10-year paper rose about 6.4 basis points to its highest level since July before settling lower.

South Korea's equities (.KS11) jumped 0.4% on strong foreign buying, which helped the won rebound. The currency ended the week up 0.1%.

Shanghai stocks (.SSEC) fell 1.1%, finishing the week lower for the first time in 1-1/2 months, after the United States put investment and export restrictions on dozens of Chinese firms, escalating tensions between the world's top two economies.

Equity markets in Thailand (.SETI), India (.NSEI), Jakarta (.JKSE) and the Singapore (.STI) followed suit, down about 0.4% to 1.3%.

HIGHLIGHTS

** Singapore's 5-year benchmark yield was down 3 basis points at 1.278%

** Top Glove Corp (TPGC.KL) and Hartalega Holdings (HTHB.KL) boosted the Malaysian benchmark index (.KLSE) after rival glove maker Supermax Corp (SUPM.KL)said it would invest $350 million to build a manufacturing facility in the United States

** Telco PLDT Inc (TEL.PS) extended gains to a third day to lift Philippine shares (.PSI). The senate on Wednesday passed a bill to allow full foreign ownership of public services like telecommunication firms.

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Reporting by Anushka Trivedi in Bengaluru; Editing by Subhranshu Sahu

Our Standards: The Thomson Reuters Trust Principles.

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