Asian Currencies Routed as Yen, Ringgit Tumble; Rupiah Hit Hardest

All Asian currencies weakened against the United States dollar in trading on Wednesday, as the US dollar index regained strength. Based on Refinitiv data as of 09:45 Western Indonesia Time, all ten monitored Asian currencies were uniformly pressured by the greenback. The South Korean won experienced the deepest decline, weakening 0.65% to KRW 1,557 per US dollar. The rupiah followed as the second weakest currency in Asia. The Garuda currency depreciated 0.53% to Rp 17,970 per US dollar, bringing it increasingly close to the psychological level of Rp 18,000 per US dollar. The Philippine peso also corrected quite sharply, falling 0.42% to PHP 61.580 per US dollar. The Thai baht weakened 0.30% to THB 33.34 per US dollar, followed by the Vietnamese dong which fell 0.24% to VND 26,319 per US dollar. The Malaysian ringgit also entered the red zone after weakening 0.20% to MYR 4.090 per US dollar. The Singapore dollar fell 0.19% to SGD 1.295 per US dollar, while the Taiwan dollar weakened 0.16% to TWD 31.829 per US dollar. Pressure was also seen on the Japanese yen, which corrected 0.14% to JPY 162.76 per US dollar. Although its depreciation was not as deep as other Asian currencies, the yen’s position is now at its weakest level in 40 years, or since 1986. The Chinese yuan also weakened slightly by 0.11% to CNY 6.7927 per US dollar. The weakening across all Asian currencies this morning occurred amid a strengthening US dollar in global markets. This was reflected in the movement of the US dollar index, which measures the greenback’s strength against six major world currencies, and was observed to have strengthened 0.12% to 101.311 as of 09:45 Western Indonesia Time. The DXY moved higher again after weakening earlier in the week. The US dollar’s strengthening occurred as investors awaited the release of the latest monthly US labour data. This data will serve as an important clue for gauging the strength of the labour market and the direction of the US central bank’s interest rate policy. The US dollar also received support from a rise in US government bond yields. The yield on the benchmark 10-year US Treasury note rose about 10 basis points in the previous session, making dollar-based assets more attractive to investors again. On the economic data front, US job openings in May rose to their highest level in two years. Data released on Tuesday showed the number of job openings increased by 9,000 to 7.594 million. This figure was higher than market expectations of 7.296 million and was also above April’s revised figure of 7.585 million. The strong job openings data indicates that US labour demand remains quite solid, even though there are signs that hiring is beginning to slow. This condition has led the market to again see a chance that the Fed will maintain its hawkish stance for longer. Following the interest rate announcement in June, Fed officials signalled that rate hikes could still occur again this year. At the June meeting, the Fed held its benchmark interest rate at 3.50% to 3.75%. Based on the CME FedWatch Tool, market participants are now pricing in a 33.70% probability that the Fed will raise interest rates by 25 basis points at the 28-29 July meeting. Meanwhile, the probability of rates being held steady stands at 66.30%. Beyond interest rate factors, investors are also still monitoring the US-Iran peace talks in Qatar. Hopes for a long-term ceasefire remain, although the two parties are not expected to hold direct talks.