What’s going on here?
Asian currencies took a hit on June 14, 2024, as the US dollar held firm, sending the Indonesian rupiah to a four-year low.
What does this mean?
Asian currencies have been grappling with the dollar’s strength, leading to a notable decline in their values. The Indonesian rupiah fell 0.7% to 16,375.00, marking a 6% drop year-to-date and making it the second-worst performer in the region after the Thai baht. Analysts anticipate that Bank Indonesia might be forced to consider a 25 basis point rate hike to counteract the pressure on the rupiah. In response to the market turmoil, Bank Indonesia intervened in the forex market to stabilize the currency and maintain investor confidence. Meanwhile, the Bank of Japan’s unexpected announcements regarding its bond purchase reductions added to the yen’s weakness and bolstered the dollar. The dollar index stayed steady at 105.33, gaining 0.6% for the week, further impacting currencies like the Thai baht, South Korean won, and Malaysian ringgit.
Why should I care?
For markets: Currency pressures ripple through markets.
Most Asian currencies, including the Thai baht and the South Korean won, were down between 0.5% to 1% for the week. Indonesian stocks also declined nearly 2%, marking their fourth consecutive week of losses and hitting the lowest level since November 2023. On the flip side, the Taiwanese stock market experienced a 0.9% rise, hitting a record high, while Singapore stocks fell 0.5%, facing their toughest week since April 19.
The bigger picture: Global economic shifts and central bank maneuvers.
Bank Indonesia’s intervention aims to control inflation and stabilize the rupiah amidst a challenging economic environment. Elsewhere in the region, the Philippine central bank has projected narrower current account deficits for 2024 and 2025, signaling a cautious but positive economic outlook. Meanwhile, Malaysia remains steadfast about its inflation outlook for the year following diesel subsidy reforms, and Thailand considers setting a new inflation target, which might lead to a rate cut.
