Rupee and Rupiah Lead Asian Currency Weakness

The Indian rupee and Indonesian rupiah led the decline among Asian currencies against the US dollar. Year-to-date (YTD), the Indian rupee has weakened by more than 10% against the US dollar, the deepest decline among Asian currencies. This is followed by the Indonesian rupiah, which depreciated by more than 9% (YTD). The only major Asian currency to strengthen against the US dollar was the Japanese yen, as shown in the graph below.

Based on Bloomberg data, the rupiah exchange rate closed at Rp 14,935 per US dollar on Tuesday (September 4th), representing a 0.8% weakening compared to the previous day's closing. This was the deepest decline among other Asian currencies. The depreciation of regional currencies due to global uncertainty pushed the rupiah to reach Rp 14,900 per US dollar. Meanwhile, the Indian rupee closed down 0.4% at 71.49 per US dollar.

The US-China trade war, rising speculation of a Fed interest rate hike, triggered a weakening of Asian currencies, including the rupiah. Furthermore, the financial crisis in Argentina caused investors to be cautious about investing in currencies considered high-risk, such as those in emerging markets like Indonesia. This is despite Indonesia's fundamentally solid macroeconomic conditions. The economy continues to grow above 5%, inflation is controlled at 3.2%, interest rates remain attractive at 5.5%, and foreign exchange reserves are sufficient to finance more than six months of imports and government foreign debt.