Rupiah Potentially Strengthening Supported by US Labor Data

JAKARTA - The rupiah exchange rate on Tuesday, July 9, 2024, is expected to strengthen against the United States (US) dollar supported by US labor data.

Quoting Bloomberg, the rupiah exchange rate on Monday, July 8, 2024, the rupiah exchange rate on the spot market closed up 0.12 percent at IDR 16,258 per US dollar. Likewise, the rupiah exchange rate at Bank Indonesia's (BI) Jakarta Interbank Spot Dollar Rate (Jisdor) closed up 0.29 percent to IDR 16,265 per US dollar.

Bank Permata Chief Economist Josua Pardede said the US dollar was traded slightly stronger during Monday's trading session as investors await Powell's testimony before the Senate Banking Committee.

"The strengthening of the US dollar was also supported by risk-off sentiment in Europe after the Left Wing coalition emerged victorious in the French legislative elections," he told VOI, Tuesday, July 9.

Meanwhile, during yesterday's US trading session, the strengthening of the US Dollar was also driven by the release of higher-than-expected US consumer credit data for May 2024, implying strong consumer demand in the United States.

Josua said that at the end of yesterday's trading session, the US Dollar Index closed up 0.12 percent to 105.00.

According to Josua, the rupiah opened stronger in Monday's trading session, mainly due to sentiment from the release of US labor market data.

"Employment data, especially the US unemployment rate and NFP which indicated an easing of the US labor market, drove the US Dollar to weaken, and this trend continued during the Asian session," he said.

However, Josua said that the rupiah cut its strengthening against the US dollar at the start of Monday's trading session, influenced by the uncertainty of European political conditions after the French elections. Thus, the rupiah closed up 0.14 percent to 16,255 per US Dollar.

Meanwhile, Indonesian government bonds continued to strengthen, reflected in the downward trend in yields in Monday's session. Indonesian government bond yields fell by 1 bps to 4 bps.

Meanwhile, the trading volume of government bonds was recorded at IDR17.17 trillion, higher than the previous day's trading volume of IDR14.20 trillion.

"Foreign ownership of rupiah bonds fell by IDR1.12 trillion to IDR808 trillion or 13.91 percent of the total outstanding on July 5, 2024," he said.

Josua said that today, the government will hold a government bond auction with an indicative target of IDR 24 trillion. The series auctioned in this auction are SPN3mo, SPN12mo, FR0101, FR0100, FR0098, FR0097, and FR0102. The yields of the benchmark series of 5 years, 10 years, 15 years, and 20 years are 6.91 percent, 7.03 percent, 7.08 percent, and 7.12 percent, respectively.

Josua estimates that the rupiah on Tuesday, July 9, has the potential to move in the range of Rp16,225 per US dollar–Rp16,325 per US dollar.