The DXY Index’s monthly loss increased to 4.8% in April from 3.2% in March. In the Developed Markets, the CHF and JPY were sought most as havens from the worst US stock market sell-off since 2022, driven by US President Donald Trump’s erratic policy announcements on tariffs. The USD’s credibility as the world’s dominant reserve currency was initially shaken by the DXY’s fall amid rising US bond yields, and later took a pounding from Trump undermining the Fed’s independence with his attacks on Fed Chair Jerome Powell. EUR and GBP were subsequently favoured as alternative reserve currencies. The commodity-led currencies – NZD, CAD, and AUD – fluctuated with commodity prices, which plunged on Trump’s “Liberation Day” tariff announcements and reversed course a week later on his 90-day pause for reciprocal tariffs.
Asia-ex Japan currencies were less volatile than their DM counterparts. Contrary to expectations, the export-led TWD, KRW, and SGD performed best, thanks to Trump’s 90-day pause on reciprocal tariffs to allow for trade negotiations that included an implicit bias for currency appreciation. The CNY was remarkably resilient despite China being excluded from the 90-day pause, following its retaliation against the US tariffs and Trump’s subsequent imposition of a 145% tariff on Chinese goods. Southeast Asian currencies diverged, with the MYR, PHP, and THB posting decent gains, and the VND and IDR depreciating the most. As the top “China Plus One” transshipment hub, Vietnam faces a significant 46% reciprocal tariff on its goods into the US a trade deal with the US is not reached by the end of the 90-day pause. The IDR’s weakness was more of a continuation of the downtrend from March, driven by equity outflows triggered by resignation rumours of widely respected Finance Minister Sri Mulyani Indrawati.
Looking into May, the IDR could play catch-up to the recovery in other Asian currencies. Dr Sri Mulyani was part of the delegation headed by Coordinating Minister for Economic Affairs Airlangga Hatarto in Washington D.C. for top-level discussions to address Trump’s 32% reciprocal tariff on Indonesia. The Jakarta Composite Index has rebounded to its highest level since February 24. The 5Y CDS for Indonesia’s USD debt has narrowed below 100 bps in the past week after its spike to 131 bps on April 9. A simple regression of USD/IDR against these market indicators implies that USD/IDR should be lower at 16345 vs. yesterday’s close of 16760.
Quote of the Day
“To accomplish great things, we must not only act, but also dream; not only plan, but also believe.”
Anatole France
April 30 in history
In 1897, English physicist J. J. Thomson announced his discovery of the electron.
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