The US dollar rises slightly in Asia

Overnight currency markets remained almost unchanged, with the dollar index virtually unchanged at 93.03. With stock markets on fire, there was a distinct lack of interest by currency traders to load up on my pro-cyclical positioning among the G-10 and DM currencies. That suggests that for now, despite the wild optimism in equity markets, currency markets have reached a state of temporary equilibrium.

The return of the US president to the campaign trail, and Covid-19 and Brexit event risk in Europe could tip those scales. But currency markets are preferring patience for now. The US dollar has risen slightly in Asia after the China trade data and event risk from Malaysia and Indonesia.

 

Bank of Indonesia decision next

The Bank of Indonesia (BI) announces its latest interest rate decision on Tuesday. Indonesia has the unenviable record of having one of Asia’s worst-performing currencies, as well as an economy that has been hit hard by Covid-19. Given this toxic mix, the BI’s room to manoeuvre is small to non-existent. We expect that the BI will maintain rates at 4.0%, with USD/IDR trading at 14,750.00 today, which is uncomfortably close to BI’s line in the sand at 15,000.00. Only a fall by USD/IDR below 14,000.00 will give the BI room to make a modest rate cut, as maintaining international investor confidence takes priority over domestic needs.

In Malaysia, the political saga continues. Opposition leader Anwar Ibrahim is apparently scheduled to hold a press conference at around 1400 SGT today, after meeting the Malaysian King about forming a new government. USD/MYR has risen to 4.1530, and KLCI has eased into negative territory. Malaysian markets are likely to remain under pressure, although in the longer-term, fiscal constraints mean the government, whoever is in charge, has little room to indulge in hair-brained policies.

Overall, though, Asia appears content to let Europe take the lead when it arrives in the next few hours.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley