* Graphic: World FX rates tmsnrt.rs/2egbfVh * Graphic: Foreign flows into Asian stocks tmsnrt.rs/3f2vwbA * Indonesia June inflation narrowly misses cenbank target * Expect Indonesia to make 25bps rate cut in Q3- ANZ Research By Rashmi Ashok July 1 (Reuters) - The Indonesian rupiah eased on Wednesday as prospects of a rate cut increased after inflation came in below the central bank's target range, while broader Asian stocks struggled to retain gains as rising coronavirus cases in the United States weighed. The rupiah fell 0.5% and was set for its fifth-consecutive drop. Data showed Indonesia's inflation rate slowed further in June to 1.96%, just below the central bank's target range of 2% to 4%, fuelling expectations of more easing. "Weak price pressures support the case for a further rate cut by Bank Indonesia in the third quarter, but the timing will also be dependent on rupiah stability," analysts at ANZ Research wrote. They added they expect a 25 basis point cut, which if occurs, will be the fourth this year. The currency is already under pressure after the central bank on Monday agreed to buy low-yielding bonds, including those with zero yield, to help the government finance a bloated fiscal deficit. Bank Indonesia's purchases may stabilise the bond market, but may undermine its main policy goal of rupiah stability if debt monetization risks take hold or credit rating risks surface, analysts at Mizuho wrote in a note. The Philippine peso slipped 0.2%, in part from a surprise 50 basis point rate cut last week that sapped appreciation in the currency and sent 10-year bonds yields diving half a percentage point at the start of the week to 2.8%. Still, a bond auction on Monday was oversubscribed, indicating investor willingness to buy the country's relatively higher yielding bonds despite the rate cut. Elsewhere, Asian stocks struggled to make headway as the biggest one-day surge in coronavirus cases in the United States since the start of the pandemic dented an initial boost from data showing China's factory activity grew at a faster pace in June. Adding to concerns, the first arrest was made in Hong Kong under China's sweeping national security law aimed at increasing its control on the financial hub. Singapore's stocks traded 0.7% higher while South Korean shares turned negative, after gaining over 1% earlier. Indonesian stocks also slipped. Chinese stocks were the top performers, adding about 1.4%. HIGHLIGHTS: ** Malaysia's 10-year benchmark yield fell 0.8 basis points to 3.049%, while 3-year benchmark yield eased 1.2 basis points to 2.254% ** Top losers on the Jakarta stock index included Yanaprima Hastapersada Tbk PT, down 7%, and Indonesia Pondasi Raya Tbk PT, which was 6.9% lower ** Top gainers on the Singapore STI included Sembcorp Industries Ltd up 4% and SATS Ltd at 2.1% higher Asia stock indexes and currencies at 0722 GMT COUNTRY FX RIC FX FX YTD INDEX STOCKS STOCKS DAILY % DAILY YTD % % % Japan +0.27 +0.91 -0.75 -6.49 China <CNY=CFX -0.03 -1.47 1.38 -0.79 S> India -0.10 -5.55 0.93 -14.55 Indones -0.49 -2.60 -0.25 -22.33 ia Malaysi +0.00 -4.51 0.52 -5.03 a Philipp -0.18 +1.64 0.03 -20.54 ines S.Korea <KRW=KFT -0.03 -3.91 -0.08 -4.14 C> Singapo -0.01 -3.50 0.64 -19.12 re Taiwan +0.56 +2.07 0.71 -2.45 Thailan -0.19 -3.36 -0.12 -15.34 d (Reporting by Rashmi Ashok in Bengaluru; Editing by Sriraj Kalluvila)
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