Tapering Issues Reemerge, Action to ‘Throw’ Dollars in Asia Eases

Jakarta, CNBC Indonesia – The majority of Asian currencies moved varied with a tendency to strengthen against the United States (US) dollar in trading this morning, Wednesday (11/8/2021). The rupiah itself is ‘not competing’ because the Indonesian financial market is on holiday, due to the decision to take leave with the government to commemorate the Islamic New Year.

Issue tapering (reduction in asset purchases by the US central bank, the Fed) still overshadows the movement of the Yellow Continent currency lately.

According to Refinitiv data as of 09:58 WIB, the Thai baht was the strongest against the US dollar, at 0.24%, followed by the Chinese yuan, which edged up 0.07%. Meanwhile, the Malaysian ringgit was the weakest at 0.14%, followed by the Korean Won at 0.08%.

US Dollar vs Major Asian Currencies

Yesterday the rupiah exchange rate recorded a 4-day decline in a row against the US dollar. However, the weakening of the rupiah this week is still slight.

At the end of trading, the rupiah was at Rp 14,380/US$, down 0.14% on the spot market. Meanwhile, on Monday, Garuda currency weakened 0.07%.

The weakening of the rupiah was due to the still strong US dollar supported by speculation on tapering or a reduction in the asset purchase program.quantitative easing/QE) this year by the US central bank (The Fed).

Fed vice chair Richard Clarida last week indicated: tapering can be done this year, and interest rates will be raised in early 2023.

“You sit here and see inflation is well above target and the labor market continues to improve towards pre-pandemic levels. I think this sounds like we have to be prepared tapering),” said Richard Clarida, vice chairman of the Fed, in an interview with the Washington Post.

Since then, the rupiah has continued to weaken for 4 consecutive days.

Clarida’s statement was then supported by the release of US employment data which showed further improvement. The US Department of Labor last Friday reported that throughout July the US economy was able to absorb labor outside the agricultural sector (non-farm payrolls/NFP) of 943,000 people, higher than the Reuters poll of 880,000 people.

Meanwhile, the unemployment rate also fell to 5.4% from June’s 5.9%, and was sharper than the 5.7% predicted. In addition, the average hourly wage also recorded a growth of 0.4% from the previous month.

Yesterday, it was the turn of Atalanta Fed President Raphael Bostic to say he saw the possibility tapering conducted in the fourth quarter of 2020 or around October-December.

However, Bostic also does not rule out the possibility of a faster tapering if US employment data shows continued progress as in July.

However, the US dollar has also not been able to speed up, because cases of the disease caused by the corona virus (Covid-19) are climbing again in the United States.

The addition of daily cases and hospital occupancy rates in the US has now risen to the highest level in 6 months. The delta variant of the corona virus is the trigger for this increase.

As a result, the rate of increase in the US dollar is not as big as last Thursday, and has weakened slightly this week.

“The market is looking at two things, an improving labor market, and a rise in the delta variant of the coronavirus,” said Adam Button, chief foreign exchange analyst at Forexlive in Toronto.CNBC International, Monday (9/8/2021).

“I would say the market should hold back and see how quickly the corona delta can be contained,” he added.

The latest news, the US Senate has just passed a massive infrastructure package worth US $ 1 trillion, which further adds to the optimism surrounding the greenback.

For now, investors await data on the core inflation rate and the US inflation rate to gauge market sentiment.

Higher inflation figures will strengthen prospects for an early Fed tapering, which could increase the attractiveness of the US dollar as an attractive investment for investors.

CNBC INDONESIA RESEARCH TEAM

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