On Thursday, the Rupiah exchange rate declined against the US dollar. Based on the Bloomberg spot market page, the Rupiah weakened -0.10% or 14 points and was at the level of Rp. 14,279 US dollars.

It turns out that not only the rupiah, but several currencies in Asia seem varied against the USD. One of them was when the US dollar index weakened at -0.11% and was at the level of USD 96.76. Then the Japanese Yen strengthened 0.02% at 1155.38 levels.

Then there were the Thai baht which was also up 0.31% at 33.255. There was still the Taiwan dollar, which was slightly up 0.01% at 27.795. Lastly, the Chinese Yuan and Hong Kong dollar both strengthened.

The yuan strengthened 0.06% at 6.3881 and the Hong Kong dollar strengthened 0.02% at 7.7967. In addition, several currencies experienced a decline, such as the Philippine Peso which weakened -0.21% and was at the level of 50.508.

Then there was the Korean Won which was down -0.09% at 1189.84. Then there was the Malaysian Ringgit which weakened -0.25% and was at the level of 4.2195.

Rupiah Moves Weakening Regularly

Then there is the Singapore dollar which is following a -0.03% decline at 1.3685. Although this Thursday the US dollar was corrected, the currency is still at its highest level against other currencies.

Especially after the Governor of the Federal Reserve (The Fed) Jerome Powell was re-elected in a second term for the next 4 years. Thus, this further emphasizes if US interest rates are getting stronger.

Because so far, the currency market is still supported by the perception that global central banks are expected to reduce stimulus during the pandemic while making interest rates rise.

The rupiah exchange rate has consistently weakened against the United States (US) dollar this week amid high inflation in the superpower countries amid the tapering off the program.

Garuda's currency was at Rp 14,300 per US dollar on Friday or weakened from Thursday's closing position of 0.22%. During the week, the rupiah also weakened by 0.46% (65 points). The previous week, the rupiah exchange rate also weakened, by 0.48%, to Rp 14,233/US dollar.

Weakness has been consistent for 5 consecutive days this week, with a stagnant position only on Wednesday when the US dollar strengthened thanks to positive news from data on claims for unemployment benefits for a week at 199,000, or the lowest in more than 50 years.

The Increase of the Dollar Affects the Movement of the Rupiah

Economic growth in the third quarter of 2021 was also revised up to 2.1%. As a result, the 10-year government bond yield rose to 1.68% today, from last week's 1.55% position.

Rising yields indicate falling prices in the market due to the sell-off and simultaneously create higher bond coupon expectations going forward. This will trigger buying of US government bonds so that the US dollar strengthens.

The strengthening of the rupiah was due to external factors, where the US dollar index, which records the performance of the Green Back against the currencies of the main trading partners of the Superpowers, strengthened from 95 last week to 96 this week.

The strengthening of the US dollar occurred amid increasing speculation that the US central bank The Fed will normalize monetary policy more quickly. Since last week, several Fed officials have been voicing to accelerate the pace of tapering which has started this month.

An increase in the benchmark interest rate (Fed Funds Rate) will trigger a rush of US government bond coupons, which are increasingly attractive following the trend of strengthening US Treasury yields in the secondary market.

Global investors also tend to choose securities owned by superpower countries, rather than similar instruments in developing countries where the difference in yield (spread) is getting smaller but becomes less attractive because the risk premium is still high.