Emerging FX-Asia rebounds, rupiah eyes rate verdict

SINGAPORE, Mar 6 (Reuters) The Indonesian rupiah rebounded alongside other Asian currencies on Tuesday as stock markets showed some stability after a sharp sell-off, with focus on a Bank Indonesia interest rate decision later in the day.

Markets are braced for a quarter-percentage point cut in the benchmark rate to 9 percent, but traders say the chances the central bank may keep rates steady have gone up given rupiah weakness.

The currency has fallen about 1.5 percent against the dollar in the past week. Like other Asian units, it has taken a beating from a slide in global equity markets and an unwinding of yen-carry trades.

The rupiah rose on Tuesday about 0.5 percent from late Asian levels on Monday to 9,210 per dollar, firming from Monday's intraday low of 9,260, its weakest in more than seven months.

''The market is expecting a rate cut, but which ever decision the central bank takes I think the rupiah will stay weak,'' said a Jakarta-based dealer.

''If they cut, it's going to reinforce the risk aversion and an unwinding of the carry trades. But if they don't cut rates, that will reinforce a view that they are a bit worried about the volatility in the market.'' The dealer said that the rupiah would struggle to strengthen beyond 9,200, while falls towards 9,300 were likely to be limited by central bank intervention in the currency market.

Some analysts said a pause in rates was now likely.

''The central bank is expected to remain on hold in view of the rallying dollar/rupiah,'' JPMorgan analysts said in a note.

''With the emerging market and carry sell-off pressuring emerging market assets and rupiah sentiment weak amid the carry unwind, Bank Indonesia will be loathe to cut rates to facilitate further rupiah selling.'' Elsewhere, relative calm in regional equity markets allowed other Asian currencies to rebound from multi-month lows.

The South Korean won rose as far as 947.10 per dollar, up about 0.5 percent from a more than four-month low hit Monday.

The Malaysian ringgit edged away from Monday's seven-week trough around 3.5185 per dollar, while the Philippine peso strengthened as far as 48.75 to the dollar -- up about a third of a percent from a five-week low hit the previous session.

REUTERS BDP BST0933