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Indonesian Rupiah hits 4-year low; Other Asian forex dip before key data

June 10, 2024

Key points:

  • Indonesian Rupiah reaches a four-year nadir, influencing broader trends in emerging Asian currencies.
  • Jakarta stocks descend to their lowest point since November 2023, amid regional market pressures.

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.

The chart shows the USD/IDR currency pair (symbol: USDIDR) on a 1-hour timeframe, with a trend increase of 0.12%. The chart displays an open price of 16,280.9, a close price of 16,300.2, a high of 16,317.5, and a low of 16,274.5. Technical indicators such as moving averages (MA) and the MACD (26,16,9) are included. The Indonesian Rupiah has hit a 4-year low, influenced by strong non-farm payroll data from the U.S. and seasonal dividend repatriations. These repatriations, where dividends are paid out to offshore investors by multinational and government-linked companies, typically put pressure on the local currency.

Picture: Indonesian Rupiah trading at 16,300 as seen on the VT Markets app.

Rupiah declines on strong U.S. payroll data and seasonal dividend repatriations

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%.

U.S. dollar index hits mid-May high

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.

You might be interested: S&P 500 and Nasdaq hit record highs on Fed easing hopes 

Thailand and Taiwan Central Banks set to announce policy decisions in June

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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