Forex

In Taipei trading on July 20, the U.S. dollar surged against the Taiwan dollar, breaking above NT$32.40 in early trade and reaching NT$32.421 at 10:30 a.m., up NT$0.133 on the day. The move followed foreign investors’ net sale of NT$189.0 billion of Taiwan stocks on Friday, when the Taiex sank 6.47% to 42671.27 and TSMC fell 7.29%. Continued foreign selling and faster dividend-related fund repatriation, alongside hawkish comments from Federal Reserve officials and rising tensions in the Middle East, added pressure on the Taiwan dollar. Some market participants expect USD/TWD could test NT$35.2 in the short term.

Bank Indonesia has raised interest rates by a total of 100 basis points this year and has also intervened directly to steady the rupiah. The currency is expected to strengthen to 17,850 per dollar this quarter from 17,895 at the prior close. Indonesia’s benchmark 10-year government bond yield of about 7.25%—among the highest in emerging markets—has helped draw foreign inflows for a second straight month. Markets are split ahead of Wednesday’s rate decision over whether the central bank will hold or deliver another 25-basis-point hike, while a potential MSCI reclassification still threatens about US$15 billion in passive outflows.

Indonesia’s foreign direct investment rose 27.4% year on year in the second quarter, helping the rupiah post a fourth straight day of gains and pushing USD/IDR down to around 17,990. Separately, Iran has instructed Yemen’s Houthi militia to prepare to close the Red Sea shipping route in response to a potential U.S. strike on Iranian power infrastructure. Explosions were also reported in several locations, adding to concerns about risks to global oil supplies and spilling over into Indonesia’s foreign-exchange market.

US inflation eased more than expected in June, with headline CPI slowing to 3.5% year on year and core CPI to 2.6%. After the release, the US dollar index (DXY) fell 0.3%, USDJPY closed 0.1% lower and USDSGD also softened. The cooling print reduced near-term expectations for Federal Reserve rate hikes and pushed short-dated US Treasury yields lower, pressuring the dollar and rippling across major Asian currency pairs.

S&P Global has reaffirmed Indonesia’s sovereign credit rating at BBB/A-2 with a stable outlook, saying recent fiscal strains should be temporary and could be offset by higher commodity prices and spending cuts. The decision contrasts with Moody’s and Fitch, which cut their outlooks for Indonesia to negative earlier in the year, helping bolster market confidence in the country’s economic management. A Bank Indonesia official said the rupiah has significant room to strengthen after it recently touched a record low of 18,000 per dollar.

USD/JPY slid by ¥1 in minutes after Japan’s 10-year and 20-year government bond yields fell 10 basis points on the day. Japan’s producer price index unexpectedly accelerated to 7.1%, the highest in months, adding to market concerns about pressure on the Bank of Japan. A Japanese official said the government wants GPIF and other major domestic funds to shift more money back into Japanese assets, a move that could encourage capital repatriation and dampen yen depreciation momentum. The yen is hovering near 40-year lows, while investors see the BOJ’s policy options as increasingly limited.

Japan’s Finance Minister Satsuki Katayama said the government will push households and pension funds, including the Government Pension Investment Fund (GPIF), to increase investment in Japanese financial assets. The GPIF manages ¥293.6 trillion in assets. Her remarks fueled expectations of renewed allocation to yen-denominated assets, lifting the yen against the dollar from levels near multiyear lows.

The Australian dollar rose to around 0.6950 against the U.S. dollar after hawkish remarks from RBA Assistant Governor Sarah Hunter. She said the central bank could tighten policy further if an oil shock lifts inflation expectations. The RBA has raised rates three times by 25 basis points this year, taking the cash rate to 4.35%, with markets pricing a 19% chance of a move to 4.60% at the August meeting. Minutes from the Fed’s June meeting showed most officials expect rates to end the year above current levels, though the path was not specified.

Malaysia’s ringgit firmed in early trade, rising to 4.0730/0800 against the US dollar as the release of Federal Open Market Committee minutes highlighted a clear divide among officials over the interest-rate path, weighing on the greenback. The US Dollar Index (DXY) slipped in response, lifting most Asian currencies, including the ringgit. Markets are also watching Bank Negara Malaysia’s Monetary Policy Committee decision, with the Overnight Policy Rate expected to stay at 2.75%.

USD/ZAR briefly climbed above R16.50 after hawkish Federal Reserve guidance buoyed the dollar, before reversing on softer US nonfarm payrolls data. The pair fell back to around R16.23, putting the R16 level back in focus. Repeated failure to hold above the 200-day simple moving average has reinforced resistance, while South Africa’s rate advantage, lower oil prices and improved global risk appetite have supported the rand.