The exchange rate of the rupiah against the United States dollar (US) moves to strengthen in the spot market trading today. The US dollar is indeed not getting 'the wind'. On Monday (7/27/2020), US $ 1 was equivalent to Rp 14,500 when the spot market opened. Rupiah strengthened 0.28% compared to the close of trading last weekend.
Over the past week, the rupiah strengthened 0.55% in the presence of the US dollar. Uncle Sam's country's currency was successfully pushed down to Rp 14,600. Today it seems that the strength of the rupiah can continue. Because the US dollar is miserable.
At 07:34 WIB, the Dollar Index (which measures the greenback's position before six major world currencies) was down 0.19%. In the past month, this index has dropped more than 3%.
This week, the Federal Reserve (The Federal Reserve / The Fed) will hold a monthly meeting to determine the benchmark interest rate. Citing the FedWatch CME, the possibility of the benchmark interest rate holding at 0-0.25% is 100%. There is no room for change at all.
Low benchmark interest rates have helped to reduce yields on Superpower State government bonds. At the close of trading last weekend, the yield of the 10-year US government bond was at 0.588%. The yield was once in the range of 0.4% last March, the lowest in modern US history. While at the same time, US inflation is still low. In June, the US inflation rate was 0.6% year-on-year (YoY).
Demand for the US Dollar Weakens
So the real interest rate that investors get (after inflation is reduced) is minus. That is, putting money in President Donald Trump's government debt securities is not profitable, instead, it is a profit. Which investors are willing?
US dollar-based assets that are less 'sexy' to make a demand for the currency down. As a result, the US dollar was severely beaten by other currencies, including the rupiah.
The US dollar exchange rate was once again depressed globally on Friday, July 24, 2020, along with news that the Chinese government had taken steps to get revenge on the United States (US). The revenge was carried out by closing one of the US consulates in China.
With the potential for a cold war between the US-China, market participants were busy releasing the US dollar so that it fell significantly before the Australian dollar, euro, pound, Canadian dollar, New Zealand dollar, and the franc. The US dollar also dropped in the face of some Asian currencies, such as the Taiwan dollar, Singapore dollar, won, yen, and rupiah.
USD Is Pressured By Several Currencies
Sure enough, the rupiah also became a currency that pressured the US dollar to be driven out of the level of Rp14,500. As of 10.07 WIB, the rupiah appreciated 0.27% to the level of Rp14,538 per US dollar. Previously, the rupiah touched its best level of Rp14,499 per US dollar.
Rupiah's performance towards the end of this week is fairly good by being the third strongest currency in Asia after the yen (-0.10%) and the Taiwan dollar (-0.06%). That means, the rupiah strengthened over the baht (0.41%), yuan (0.38%), ringgit (0.29%), Hong Kong dollar (0.27%), won (0.16%), and dollar Singapore (0.15%).
Based on Refinitiv data, the rupiah opened trading at the level of 14,500 / US $, strengthening 0.34% in the spot market. The appreciation of the rupiah sharply increased by 0.62% to Rp 14,460 / US $ at 9:07 WIB. Before today, the rupiah has posted a 3-day winning streak and became the best in Asia in the past 2 days.
The US dollar has been battered lately, with the index yesterday ending at 94.692, which is the lowest level since September 2018. The US dollar index is formed from 6 major currencies and is often used as a benchmark for the strength of the US dollar against other currencies.
