Rupiah Corrected After The Fed Advances Projection Of Interest Rate Increase

JAKARTA - The rupiah exchange rate transacted between banks in Jakarta on Thursday morning corrected after the Fed advanced its projection of an increase in the benchmark interest rate.

At 9:24 western Indonesia time, the rupiah weakened 92 points or 0.65 percent to a position of Rp14,330 per US dollar compared to the position at the close of the previous trade of Rp14,238 per US dollar.

"The rupiah exchange rate could be under pressure again toward the US dollar due to the attitude of the US central bank this morning. The US dollar and US Central Bank bond yields strengthened because of this," said money market observer Ariston Tjendra in Jakarta, reported by Antara, Thursday, June 17.

The Fed has accelerated its projection of an increase in the Fed's benchmark interest rate, which looks to have the potential to rise by 50 basis points in 2023. Whereas previously the Fed predicted that there would be an increase in 2024.

The Fed also raised its forecast for US inflation in 2021 to 3.1 percent compared to the previous projection of 2.2 percent, based on the Core PCE Inflation indicator.

The dollar index which measures the dollar's strength against other major currencies is currently at 91.339, up from its previous close of 91.129.

Meanwhile, the 10-year US bond yield is currently at 1.57 percent, up from its previous closing position of 1.569 percent.

From within the country, continued Ariston, the recent increase in COVID-19 cases has the potential to be a scourge that suppresses the rupiah.

"Today Bank Indonesia will release the results of its monetary policy meeting, which is likely to maintain its interest rate to offset the potential for tapering from the Fed," said Ariston.

Ariston said that today's rupiah has the potential to weaken to the range of Rp14,270 per US dollar with the potential to strengthen in the range of Rp14,200 per US dollar.

On Wednesday, June 16, the rupiah closed down 13 points or 0.09 percent to Rp14,238 per US dollar compared to the position at the previous close of trading at Rp14,225 per US dollar.