The Indonesian Rupiah marked a new four-year low on Monday, declining as much as 0.6% to 16,293.00 against the U.S. dollar, reflecting broader weaknesses among emerging Asian currencies. This downturn follows robust U.S. job data and precedes several upcoming central bank policy meetings.
Picture: Indonesian Rupiah trading at 16,300 as seen on the VT Markets app.
The decline in the Rupiah is partially attributed to the strong non-farm payrolls data from the U.S. and seasonal dividend repatriations. These factors typically put pressure on the local currency as dividends are paid out to offshore investors by multinational and government-linked companies.
The U.S. dollar’s strength has posed challenges for the Rupiah, and analysts remain cautious about the currency’s potential to maintain levels below 16,300. In response to the Rupiah’s volatility, Bank Indonesia has been actively participating in the forex market to mitigate excessive fluctuations.
Other regional currencies also faced setbacks, with the Thai baht dropping by 0.7%, the Malaysian ringgit by 0.6%, and the South Korean won experiencing its sharpest drop since April 19, falling by 1.2%.
The U.S. dollar index reached 105.250 at Friday’s close, marking its highest since mid-May. This has shifted market focus to the upcoming U.S. inflation data and monetary policy decision scheduled for June 12.
Although the Federal Reserve is anticipated to maintain interest rates, the market is keen on any new rate projections. The probability of a Fed easing cycle beginning in September could be influenced by the outcomes of this meeting.
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Central banks in Thailand and Taiwan also have policy decisions due this week. It is expected that Taiwan’s central bank will keep rates unchanged due to slowing inflation, reducing the risk of a surprise rate hike.
The Bank of Thailand is also expected to maintain steady rates, likely emphasising the potential for economic recovery while being cautious of financial stability risks.
In the equity markets, Philippine stocks fell by 0.8%, and the Indonesian benchmark index also declined by as much as 0.8%, reaching its lowest level since November 14, 2023. Thai stocks dropped significantly, reaching their lowest point since November 10, 2020, at 1,313.26.
Also read: Indonesian rupiah, Philippine peso top Asian forex losers
With financial markets in Taiwan and China closed for a public holiday, the regional focus intensifies on these market dynamics and central bank decisions, which are poised to influence near-term trading behaviors and investor strategies.
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