Rupiah Lesu Imbas The Prospect Of The Fed's Interest Rate

Rupiah (Photo: Doc. Antara)

JAKARTA - Currency Market analyst Lukman Leong stated that the weakening of the rupiah against the United States (US) dollar at the opening of trading today was in line with the increased expectations and prospects for the Fed interest rate.

The increase in expectations and interest rate prospects was following a statement by the Chairman of the Board of Governors of the US Federal Reserve (Fed) Federal Bank Jerome Powell who was hawkish.

"Powell sees inflation will not reach the target of 2 percent by 2025," said Lukman Leong quoting Antara.

For now, he said again, the Fed looks set to continue hawkish until the end of the year.

The strengthening of the US dollar was also influenced by US unemployment claim data that was better than expected and revised Gross Domestic Product (GDP) in the first quarter of 2023 from initially 1.3 percent to 2.0 percent which showed stronger US economic growth.

"The Fed sees this triggered by strong demand and causes inflation to stay high," said Lukman.

At the opening of trading today, the rupiah weakened 52 points or 0.35 percent to Rp15,045 per US dollar from the previous Ro14,993 per US dollar.

Until now, the position of the rupiah exchange rate is IDR 15,048 per US dollar, strengthening 55 points or 0.37 percent.

The US dollar rose against another major currency basket at the end of trading Thursday (Friday morning WIB), gaining support from the reading of GDP and strong labor data, which gave the Federal Reserve a possible foothold to continue to raise interest rates.

The dollar index, which measures the greenback against six major rival currencies, rose 0.42 percent to 103.3432 at the end of trading, up to a two-week high.

US's early weekly unemployment claims fell by 26,000 claims to 239,000 seasonalally adjusted claims, the biggest drop in 20 months and below expectations of 265,000 claims by economists surveyed by Reuters.

Speaking at an event held by Spain's central bank on Thursday (29/6), Federal Reserve Chair Powell indicated that the Fed is likely to continue its interest rate hike after the break earlier this month.

In addition, Federal Reserve Atlanta President Raphael Bostic said on Thursday (29/6) that the Fed should raise interest rates if price growth moves away from the target, or inflation expectations begin to move in "difficult ways".