Thursday's Rupiah Weakening Impacted by Pressure from US Interest Rates that Last Longer

JAKARTA - The rupiah exchange rate at the close of trading in Jakarta, Thursday, January 29, weakened 33 points or 0.20 percent to Rp16,755 per US dollar from the previous Rp16,722 per US dollar.

Research and Development Indonesia Commodity and Derivatives Exchange (ICDX) Taufan Dimas Hareva said the weakening of the rupiah was influenced by expectations that US interest rates would remain high for longer.

"The rupiah in today's trade is fluctuating. The pressure still comes from global factors, especially the strengthening of the US dollar in line with the expectation that the US interest rate will remain high for longer, as well as the rise in US Treasury yields," he said, quoted by Antara.

Citing Xinhua, the Federal Reserve decided to keep its policy rate unchanged at a range between 3.5-3.75 percent.

Various indicators show that economic activity is growing solidly, employment growth remains low, the unemployment rate shows some signs of stability, and inflation is somewhat high.

"This condition encourages global investors to be more cautious about risky assets, so that the room for strengthening the rupiah is limited even though the weakening is not expected to be aggressive," said Taufan.

"Looking at domestic sentiment, the sentiment towards the rupiah tends to be mixed. The stability of Bank Indonesia's (BI) policies is considered to play a role in containing exchange rate volatility, but dynamics in the stock market can affect investors' risk perceptions.

"Trading halt does not have a direct impact on the rupiah, but it can trigger the outflow of foreign funds from the financial market if the pressure continues, which ultimately has the potential to suppress the exchange rate," said ICDX Research and Development.

Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) today also weakened to Rp16,786 per US dollar from the previous Rp16,723 per US dollar.