Not Only the Rupiah, Global Currencies Also Weaken Against the US Dollar

The high inflation rate in the United States, a consequence of the improving economy, has led the Federal Reserve (The Fed) to raise its benchmark interest rate. This policy has strengthened the US dollar against other world currencies, as investors seek dollar-denominated assets and divest from assets considered risky. As a result, the Indonesian Rupiah has also weakened.

According to Bloomberg data, between December 29, 2017, and August 13, 2018, the Venezuelan Bolivar has depreciated by almost 100%, reaching VEF 0.000004 against the US dollar, compared to VEF 0.100125 at the end of 2017. This is the sharpest depreciation among all currencies. The Turkish Lira follows, weakening by 42.88% against the US dollar, followed by the Argentine Peso, which depreciated by 36.27%. Similarly, the Indonesian Rupiah weakened by 7.15% against the US dollar this year.

The continued positive performance of the US economy, coupled with tax cuts, protectionist policies on imported goods, and high inflation, suggests that the Fed may raise interest rates again. This would further strengthen the US dollar, leading to further weakening of global currencies, including the Rupiah.