A Round of Applause! Rupiah Strongest in Asia as Won and Ringgit Tumble
Jakarta, CNBC Indonesia - The majority of Asian currencies weakened against the United States dollar in trading on Wednesday, but the rupiah managed to strengthen sharply and return below the psychological level of 18,000 per US dollar.
According to Refinitiv data as of 09.30 Western Indonesian Time, seven out of ten monitored Asian currencies weakened against the greenback, while three strengthened.
The rupiah was the currency with the sharpest appreciation in Asia this morning. The Garuda currency strengthened 0.61% to the position of 17,940 per US dollar. This position brought the rupiah back below the psychological level of 18,000 per US dollar.
The rupiah’s strengthening occurred alongside the Japanese yen, which edged up 0.01% to 160.34 per US dollar, and the Philippine peso, which appreciated 0.11% to 61.520 per US dollar.
On the other hand, pressure was still visible on the majority of Asian currencies. The Vietnamese dong and the Thai baht were the two currencies with the deepest depreciation, each being corrected by 0.21%.
The Malaysian ringgit was also pressured by 0.15% to the position of 4.064 per US dollar, while the South Korean won weakened 0.12% to 1,524.8 per US dollar.
The Taiwan dollar likewise weakened 0.12% to 31.62 per US dollar, the Singapore dollar fell 0.09% to 1.287 per US dollar, and the Chinese yuan was corrected 0.05% to 6.775 per US dollar.
Meanwhile, the US dollar index (DXY) was observed strengthening 0.07% to a position of 99.987 at the same time. The DXY was still moving around the 100 level after experiencing a sharp rebound in previous trading.
The US dollar continues to receive support from geopolitical uncertainty in the Middle East. Tensions rose again after the United States launched strikes described as a self-defence act against Iran, following the downing of a US helicopter.
Iranian Foreign Minister Abbas Araghchi warned that the Iranian armed forces would not allow any attack or threat to go unanswered. This condition has revived doubts about the fragility of the ceasefire and the prospects for a long-term peace agreement.
The conflict in the region has also driven up energy prices. Higher energy prices have reignited inflation concerns and opened the possibility that major central banks will maintain, or even raise, interest rates for longer.
From the United States, market participants are also waiting for the release of the latest inflation data to read the policy direction of the US central bank, the Federal Reserve. Previously, stronger-than-expected US labour data had reinforced expectations that an interest rate hike remains possible before the end of the year.
The combination of geopolitical tensions, energy inflation risks, and US interest rate expectations keeps the US dollar holding strong. This condition ultimately makes it difficult for the majority of Asian currencies to move stronger, even though the rupiah successfully became an exception this morning with a considerably sharp appreciation.