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EMERGING MARKETS-Indonesia's rupiah eases, stocks whacked as virus cases mount

    * Indonesia shares track worst day since May 19
    * Bank of Japan keeps monetary policy steady
    * Graphic: World FX rates tmsnrt.rs/2RBWI5E
    * Asian stock markets: tmsnrt.rs/2zpUAr4

    By Shashwat Awasthi
    June 18 (Reuters) - Indonesia's rupiah hovered near a
one-month low and stocks slid 1% on Friday as rising COVID-19
cases continued to erode risk sentiment, while investors across
the region further digested the U.S. Federal Reserve's hawkish
signals this week.
    The rupiah weakened for the fifth straight session
and fell as much as 0.3%, a day after Bank Indonesia (BI) held
its benchmark rate at a record low and pledged to ensure the
currency remained stable.
    Jakarta's stock index shed 1.2% and was set to post
its first weekly drop in four after Indonesia on Thursday
reported its biggest daily rise in coronavirus cases since
late-January.
    The rupiah has rallied more than 2% since April but was set
to lose more than 1% this week. Analysts believe BI will hold on
rates this year, but spiking infections and the Fed's indication
of raising rates earlier could heap pressure on the currency.
    "Going forward, given subdued inflation pressures and the
nascent recovery, we expect Bank Indonesia to keep the policy
rate unchanged this year," Goldman Sachs analysts said.
    "However, we view risks around BI policy as skewed in a
hawkish direction, particularly if further Fed communications or
upside U.S. data surprises cause FX market pressures to
intensify."
    Currencies across the rest of emerging Asia remained mixed,
though South Korea's won fell for the fifth
consecutive day.
    The Fed's sudden turn on Wednesday revitalised the dollar
and U.S. Treasury yields, diminishing the attraction of emerging
market currencies for carry trade - whereby investors borrow
low-yielding currencies and convert them to buy assets where
returns are higher.
    Morgan Stanley analysts recommended cashing out of long
positions in many Asian currencies, including the rupiah and the
Malaysian ringgit, and held a bearish view after the Fed
readout.
    "The most important reason why we have been recommending
carry trades in Asia was a patient/dovish Fed... Now the
conditions have changed materially on the back of a hawkish
surprise from the Fed," they said in a note.
    Riskier currencies, such as those of emerging markets,
thrive on U.S. interest rates remaining low because they benefit
from the interest rate differential that increases their appeal
for carry trade.
    Taiwan's dollar inched 0.1% lower and stock
advanced marginally after its central bank on Thursday stood pat
on interest rates but hiked the island's growth outlook for the
year.
    Recently high-flying Philippine shares extended
losses from the previous day and gave up 0.4%, despite its
central bank's assertion on Thursday that it had enough measures
to counter any macroeconomic fallout from the Fed's policy
shift.
    
    HIGHLIGHTS
    ** Indonesian 10-year benchmark yields are up 5.8 basis
points at 6.534%.
    ** Top losers on the Jakarta stock index include MegaPower
Makmur, Mulia Industrindo and Bank IBK
Indonesia, all down 7%.
    ** In the Philippines, top losers are Metropolitan Bank and
Trust down 2.9%, Puregold Price Club down
2.1% and JG Summit Holdings down 2.1%.
    
    
      Asia stock indexes and currencies at 0337 GMT                             
   COUNTRY      FX RIC    FX DAILY %  FX YTD %    INDEX   STOCKS DAILY %  STOCKS YTD %
    Japan                   +0.01       -6.31                  0.31           6.06
    China                   +0.08       +1.31                 -0.38           1.13
    India                   +0.00       -1.37                  0.00          12.23
  Indonesia                 -0.24       -2.40                 -1.00           0.48
  Malaysia                  -0.05       -2.90                  0.12          -3.35
 Philippines                +0.23       -0.64                 -0.22          -3.73
   S.Korea                  -0.09       -4.00                  0.21          13.86
  Singapore                 +0.22       -1.39                 -0.29          10.04
   Taiwan                   -0.12       +2.47                 -0.17          17.85
  Thailand                  +0.16       -4.43                 -0.13          11.47
 
 (Reporting by Shashwat Awasthi in Bengaluru; Editing by Simon
Cameron-Moore)
  
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