US markets were closed for Labour Day, but metals set the tone at the start of September. Gold gained 0.8% to a record close of USD3476/oz, while silver surged 2.5% surge to USD40.70/oz – its first move above 40 since 2011. The rallies were fuelled by expectations that the Fed will resume its rate-cutting cycle with a 25-bps cut to 4.00-4.25% at the September 17 FOMC meeting. Still, markets remain data dependent. Investors are cautious about extending USD weakness ahead of today’s August ISM Manufacturing PMI survey, where consensus looks for firmer prices paid and better employment conditions. The question remains whether the Fed is more focused on labour market slack in weighing on future inflation or tariff-driven inflation in determining the number of rate cuts after September.
Southeast Asian currencies with political overhangs found some stability.
The IDR recovered by 0.5% to 16420 per USD after Indonesian President Prabowo Subianto’s August 31 national address reassured investors that the weekend protests would not spiral into political breakdown. His speech blended empathy with unity, while signalling decisive action to restore order. Bank Indonesia reinforced the message with FX interventions, ensuring that the IDR reflected fundamentals rather than panic. These actions helped limit losses in the Jakarta Composite Index to 1.2%, after opening down as much as -3.6%. Still, investors are looking beyond rhetoric for policy credibility and reform momentum to anchor long term capital. Finance Minister Sri Mulyani Indrawati has pledged to improve the government policy responses to public frustrations and reaffirmed her commitment to stay on in the cabinet – even after protestors attacked her home.
The THB appreciated modestly by 0.1% to 32.31 per USD, while Thai equities rose 0.6%. The Thai Constitutional Court’s decision on August 29 to remove Prime Minister Paetongtarn Shinawatra from office for ethical violations may have brought a sense of relief and closure. More importantly, the THB has retained most of this year’s 6% gain against the USD, underscoring that investors view Thai politics as noisy and not systemic shocks. Frequent leadership changes – often via judicial rulings, parliamentary dissolutions, or military interventions – are already priced in. What truly disrupts sentiment is when politics spills into mass protests (e.g., the Yellow Shirt blockades in 2008 and the Red Shirts protests in 2010). This year, the THB has been less vulnerable to political premium pricing, cushioned by a persistent current account surplus, record foreign reserves, and broad-based USD weakness that is now tied to Fed cut expectations.
Quote of the Day
“You cannot shake hands with a clenched fist.”
Indira Gandhi
September 2 in history
The US Treasury Department was formally established by Congress in 1789.
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