US Dollar Slumps, Rupiah and Most Asian Currencies Rally

Jakarta, CNBC Indonesia — The rupiah strengthened against the US dollar throughout this week, tracking the movement of most Asian currencies which were supported by a weaker dollar.

Based on Refinitiv data, the rupiah closed 0.31% stronger at Rp17,685/US$ on Friday trading (21/8/2026).

The strengthening marked the rupiah’s third consecutive day of gains. The position of Rp17,685/US$ was also the strongest closing level in nearly three months, or since 22 May 2026.

On a weekly basis, the rupiah recorded a gain of 0.76%. The Garuda currency was among nine Asian currencies that managed to strengthen against the US dollar throughout the week.

The rupiah’s strengthening was supported by domestic sentiment after Bank Indonesia maintained its benchmark interest rate at 5.75% in the Board of Governors Meeting for the period of 18-19 August 2026.

BI also maintained the Deposit Facility rate at 4.75% and the Lending Facility rate at 6.50%. The decision was aimed at maintaining rupiah stability amid global uncertainty while supporting economic growth.

Of the 10 Asian currencies, nine managed to strengthen against the US dollar throughout the week. Only the Philippine peso moved in the opposite direction and ended in negative territory.

The South Korean won led gains with a surge of 2.17% to KRW 1,385.8/US$.

The won’s rise came as the market assessed the policy direction of the Bank of Korea (BOK). In July, the South Korean central bank raised interest rates for the first time in around three and a half years.

BOK Senior Deputy Governor Kwon Min-soo said South Korea’s economic growth was improving more strongly than expected. At the same time, inflation was above target and financial stability risks remained a concern.

These conditions kept the possibility of tight monetary policy alive ahead of the next BOK meeting on 27 August 2026.

The won also received support from coordination between South Korean and Japanese authorities. Officials from both countries met in Tokyo on Friday and committed to maintaining communication regarding foreign exchange market developments.

The meeting took place several weeks after the two countries took joint steps to support their respective currencies.

Below the won, the Thai baht strengthened 1.30% during the week to THB32.67/US$. The Malaysian ringgit followed with a gain of 1.20%, followed by the Singapore dollar which appreciated 0.75%.

The Taiwan dollar also strengthened 0.57% to TWD 31.825/US, followedbytheChineseyuanwhichrose0.30.

Meanwhile, the Japanese yen strengthened 0.23% to JPY 158.93/US$.

The Vietnamese dong recorded the most limited gain of 0.13% to VND26,114/US$.

On the other hand, the Philippine peso was the only Asian currency to weaken. The peso corrected 0.33% during the week to PHP 61.650/US$.

The strengthening of most Asian currencies took place as the US dollar index (DXY) weakened 0.87% during the week to 98.800.

Pressure on the dollar emerged amid rising concerns over US fiscal conditions after the government debt of Uncle Sam’s country breached US40trillionforthefirsttime.ThefigureisequivalenttoRp707, 400trillion(assuminganexchangerateofRp17, 685/US).

The large budget deficit and the need for debt issuance triggered a sell-off in US government bonds. The yield on 30-year US Treasury notes briefly surged to around 5.34%, the highest since 2007.

The US Treasury Department then increased its buyback programme for long-term bonds to ease pressure in the bond market.

The purchase value of 10-30 year bonds was raised at least twofold, from US$2 billion to a minimum of US$4 billion in each operation.

The increase is scheduled to apply to operations from 9 September to 4 November 2026.

The announcement briefly lowered long-term US bond yields. However, market participants also worried that efforts to contain rising yields would instead shift pressure to the dollar.

“Bessent’s efforts to push down US yields have not had much impact on yields, but instead weakened the dollar,” said Bannockburn Global Forex Chief Market Strategist Marc Chandler, as quoted from Reuters.

The dollar’s weakening provided room for Asian currencies to strengthen as pressure on emerging market assets eased.

Nevertheless, the market is still assessing the direction of Federal Reserve policy. Market participants estimate the probability of a US rate hike in September at around 40%, while the likelihood of a hike by December reaches 72%.

Investor attention will next turn to the speech by Fed Chair Kevin Warsh at the Jackson Hole symposium next week for clues on the direction of US interest rates amid inflationary pressures and bond market turmoil.