Indonesian rupiah hit a fresh four-year low on Monday and led losses among emerging Asian currencies, partially owing to high dividend repatriation, following strong US jobs data last week and ahead of a spate of central bank monetary policy meetings.
The rupiah fell as much as 0.6% to 16,293.00 versus the US dollar, its lowest level since April 2020, and is among the worst performing currencies in the region so far this year.
“It is partly driven by strong non-farm payrolls data last Friday, and seasonally high dividend repatriation,” said Fakhrul Fulvian, an economist at Trimegah Securities.
Dividend payouts to offshore investors by multi nationals and government-linked companies at a certain time every year tend to weigh on the local currency.
“We are cautious on upside for the (USD-IDR) pair and whether it can keep below the 16300 level amid the possibility that the greenback can still move higher,” analysts at Maybank said.
Bank Indonesia is engaging in the forex market to avoid excessive volatility despite the rupiah depreciating, a top official stated.
Elsewhere, the Thai baht was down 0.7% and the Malaysian ringgit fell as much as 0.6%, while the South Korean won fell as much as 1.2% to mark its worst day since April 19.
The US dollar index, measured against a basket of major currencies, was at 105.250 as of Friday’s close, its highest level since mid-May.
Markets are now focussed on US inflation and monetary policy decision due on June 12. Even though the Federal Reserve is widely expected to keep rates on hold, investors will be more watchful of any future projection on rates.
The odds for a Fed easing cycle beginning in September, which markets are currently pricing in, might also be impacted by the meeting.
Asian currencies: Indonesia rupiah hits weakest since early May
In Asia, central banks in Thailand and Taiwan will also announce their monetary policy decisions this week.
“We expect the Central Bank of China (Taiwan) to keep rates unchanged, as slowing inflation reduces the risk of a surprise hike, like in March,” analysts at Barclays said in a note.
“Finally, we also expect the Bank of Thailand to stay on hold next week, with the statement likely to highlight the possibility of a growth recovery while remaining vigilant on financial stability risks.”
Among equities, Phillipine stocks fell 0.8%, while the Indonesian benchmark index also slipped as much as 0.8% to hit their lowest level since Nov. 14, 2023.
Thai stocks fell as much as 1.5% to 1,313.26, their lowest level since Nov. 10, 2020.
Financial markets in Taiwan and China are closed for a public holiday on Monday.