Rupiah Looks Set to Beat August Curse

(Bloomberg) -- Seventeen seems to be a lucky number for the Indonesian rupiah. The currency is heading for its first gain for the month of August since 2003, avoiding a seasonal drag that’s plagued it every year since then.

True it is only up 0.4% against the dollar since the end of July, but has been gathering strength in recent days as the weak dollar and dovish Federal Reserve have bolstered emerging-market assets. Indonesia’s currency has typically fallen in August as overseas investors use that month to withdraw dividend payments that are paid by local companies from April to July.

“The rupiah was conforming to the seasonal weakness over the first half of the month, but managed to turn around, thanks to dollar weakness and Fed Chair Powell’s speech which kept risk appetite strong,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore.

While heading for a monthly gain, the rupiah is still the worst-performing emerging Asian currency this year. It was down as much as 1.8% for the month as recently as Aug. 18 before rallying amid the sliding dollar, and has picked up further ground in recent days after Fed Chair Jerome Powell signaled at Jackson Hole that U.S. interest rates will stay low for longer.

The rupiah may be able to extend gains in coming months but it still faces plenty of headwinds, ANZ’s Goh said. While foreign outflows spurred by the coronavirus pandemic have slowed, these have not yet been replaced with significant inflows, while there remains concern about the central bank’s debt monetization plans, he said. ANZ recently trimmed its year-end forecast for the rupiah to 14,300 per dollar from 13,950.

©2020 Bloomberg L.P.