Dollar Strength Drives Capital Outflow from Emerging Markets, Pressuring Indonesia and…
- Reports
- 4
- Developments
- 1
- Repetition
- 75%
New informationRepeats or wire copies
What happened
Capital flows are shifting away from emerging markets, placing pressure on Indonesia and Thailand due to a stronger dollar. This trend is occurring as US 10-year Treasury yields hover around 5.30% and the dollar approaches a near 18-month high. As a result, the Thai baht has risen by nearly 7% against the USD this year.
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Why it matters
The movement of money toward lucrative US government debt is causing capital to leave emerging markets, potentially triggering a vicious dollar feedback loop. For Thailand, the weaker baht makes imported energy more expensive, adding to existing economic recovery challenges.
Indonesian and Thai economies are facing global stress while financial institutions monitor the situation following the fallout of the US-Iran war.
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Who's involved
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- finance ministrySpeculative
The finance ministry could face increased fiscal risk and higher debt servicing costs due to capital flight and currency depreciation.
- PertaminaSpeculative
Pertamina could see higher operational expenses because a weaker Indonesian rupiah increases the local currency cost of imported energy.
- Thai AirwaysSpeculative
Thai Airways could face higher costs for imported fuel and maintenance parts as the currency depreciates.
- Bank IndonesiaSpeculative
Bank Indonesia could face challenges in maintaining monetary stability due to the shift in capital flows.
- Bank of ThailandSpeculative
The Bank of Thailand could face pressure on monetary stability resulting from currency pressure caused by capital outflow.
- ToyotaSpeculative
Toyota could experience increased local costs for dollar-denominated inputs and debt due to currency weakness.
Keep exploring
Part of
Geopolitical tensions reshaping Indonesian energy and resource investmentsAlso in this story
- The Indonesian government utilized bond buybacks as a measure to stabilize the domestic bond market.
- Financial institutions, including Hong Leong Bank and CIMB, are assessing market sentiment regarding the prospects of a US-Iran deal and geopolitical risks in West Asia.