Jakarta, CNBC Indonesia – The majority of major Asian currencies strengthened against the United States dollar (US) in trading Wednesday (28/10/2020). The rupiah did not participate, because the domestic financial market was off until Friday, in order to take leave with the celebration of the Prophet Muhammad SAW’s birthday on Thursday tomorrow.
Launching Refinitiv data, until 15:40 WIB, the Malaysian ringgit led the strengthening against the US dollar by 0.19%. The South Korean won, which strengthened sharply yesterday today, is even the worst currency in Asia.
Following is the movement of the US dollar against major Asian currencies.
The US dollar is in a defensive mode, because tomorrow will release data on the US gross domestic product (GDP) which is predicted to grow up to 31.9%, meaning that Uncle Sam’s country will escape recession after the previous 2 quarters GDP contracted 31.4% and 5%.
Then next week there will be the US presidential election (pilpres) on November 3 local time, which of course creates uncertainty in the market.
After the presidential election is over, the issue of fiscal stimulus in the US will be a concern again. The fiscal stimulus will eventually run out whoever the winner is whether the incumbent Republican, Donald Trump, and his Democratic opponent Joseph ‘Joe’ Biden.
However, the value of the stimulus will be even greater if Joe Biden and the Democrats win this year’s election. When the fiscal stimulus is liquid, the amount of money that differs in the economy will increase, and in theory the US dollar will weaken.
Meanwhile, if the rupiah competes today there is a possibility that it will not strengthen.
This can be seen from the movement of the rupiah exchange rate on the non-deliverable forward (NDF) market which has weakened to this point compared to just before the close of trading on Tuesday.
| Period | Exchange Rate Tuesday (27/10/2020) at 14:54 WIB | Exchange Rate Wednesday (28/10/2020) at 15:50 WIB |
| 1 week | Rp14.634,5 | Rp14.657,8 |
| 1 month | Rp14.659,0 | Rp14.700,0 |
| 2 months | Rp14.709,0 | Rp14.749,0 |
| 3 months | Rp14.755,0 | Rp14.795,0 |
| 6 months | Rp14.885,0 | Rp14.925,0 |
| 9 months | Rp15.055,0 | Rp15.088,0 |
| 1 year | Rp15.235,0 | Rp15.275,0 |
| 2 years | Rp15.976,0 | Rp16.016,0 |
NDF is an instrument that trades currencies within a certain period of time at a certain exchange rate. Previously there was no NDF market in Indonesia, only available in international financial centers such as Singapore, Hong Kong, New York, or London.
The NDF market often affects the psychological price formation in the spot market. Therefore, the exchange rate in the NDF is often followed by the market spot.
Understandably, the rupiah has weakened, in the last 2 days, the rupiah was able to strengthen respectively 0.14% and 0.07%. With the domestic market on holiday until Friday, it means that the rupiah has once again succeeded in recording five consecutive weeks of strengthening.
The rally was quite long but not very visible because the rupiah was only slightly strengthening. In total, during these 5 weeks the rupiah posted a gain of 1.52%, with the largest strengthening occurring in the week ended October 9, amounting to 1.05%.
Indeed, the strengthening is not big if you see a long rally. But it can show a good stability of the rupiah, to navigate the market with big waves next week.
RIET TEAM CNBC INDONESIA
(pap / pap)
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