Rupiah Worst Performer in Asia as Won, Yen, and Ringgit Strengthen

The majority of Asian currencies strengthened against the United States dollar on Monday morning, but the Indonesian rupiah suffered the deepest depreciation. According to Refinitiv data, as of 09:15 Western Indonesia Time, six out of ten Asian currencies had gained against the greenback, while four weakened. The rupiah fell 0.59% to Rp17,990 per US dollar, bringing it dangerously close to the psychological threshold of Rp18,000. The Philippine peso also fell into negative territory, weakening 0.24% to PHP 61.694, while the Thai baht corrected 0.12% to THB 33.62 and the Taiwan dollar edged down 0.03% to TWD 32.382. On the other side, the South Korean won led gains in Asia, strengthening 0.38% to KRW 1,481.9. The Vietnamese dong and Malaysian ringgit both rose 0.12%, with the ringgit at MYR 4.085. The Chinese yuan firmed 0.06% to CNY 6.771, while the Japanese yen and Singapore dollar each added 0.04% to JPY 162.33 and SGD 1.2907 respectively. The US dollar index was steady at 100.765, supported by fragile global sentiment. The greenback edged higher against most global currencies in early Asian trade after Middle East conflict escalated, oil prices climbed, and investor confidence remained shaky following last week’s market pressure. Analysts at Westpac noted that while foreign exchange markets were relatively calm, the US dollar held firm amid deteriorating risk appetite, with the Australian dollar weakening against the greenback and most major currencies. Westpac also highlighted pressure from technology stocks, particularly around semiconductor valuations, which weighed on risk appetite as tensions in the Middle East increased after Iran suspended its commitments in a temporary peace deal. A 3.3% surge in Brent crude oil prices to US$90.97 per barrel added to market concerns, after the US stated it had launched a ninth consecutive night of strikes against Iran and reported two US military personnel killed in Jordan. The renewed rise in oil prices has revived inflation fears, prompting markets to reassess the likelihood of global central banks, including the Federal Reserve, maintaining tighter monetary policy for longer. Despite this, markets still expect the Fed to hold rates at its next meeting on 29 July, with CME FedWatch showing an 85.6% probability of a pause, up from 61.5% a month earlier. However, internal debate at the Fed persists, with Cleveland Fed President Beth Hammack voicing on Friday that rates may need to rise to curb persistent inflation, potentially setting the stage for a contentious meeting under new Chair Kevin Warsh.