The Rupiah Exchange Rate is Estimated to be Sideways Impacted by External Sentiment

US dollar (Photo: unsplash)

JAKARTA - The movement of the rupiah on Monday, December 18 tended to be limited and moved sideways against the US dollar due to statements from two Fed officials and risk-on sentiment in Asian markets.

Quoting Bloomberg, the spot Rupiah closed at the price level of IDR 15,492 per US dollar in weekend trading, Friday 15 December. Within a week, the spot rupiah strengthened by around 0.16 percent compared to last weekend's position of IDR 15,517 per US dollar. The spot rupiah was observed to have strengthened slightly by 0.06 percent daily from yesterday's position of IDR 15,502 per US dollar.

Meanwhile, the Jisdor Bank Indonesia (BI) Rupiah closed at IDR 15,503 per US dollar. On a weekly basis, the jisdor rupiah weakened by around 0.01 percent from the position of IDR 15,500 per US dollar. On a daily basis, the rupiah weakened 0.06 percent from IDR 15,493 per US dollar.

Bank Permata Chief Economist Josua Pardede said the US dollar strengthened against major currencies, including the Euro, Sterling and Japanese Yen, driven by statements from Fed officials.

Meanwhile, New York Federal Reserve President John Williams said it was too early to think about lowering interest rates, especially because officials are still considering whether current interest rates are enough to push inflation towards 2 percent.

Meanwhile, Atlanta Fed President Raphael Bostic estimates that there will be two interest rate cuts in 2024 which will occur starting in the second half of 2024.

Josua conveyed that both statements indicated that the Fed was not considering lowering interest rates earlier in 2024.

On the other hand, according to Josua, US PMI data was mixed, and its influence was not very significant on the trend of the US dollar. Meanwhile, US Manufacturing PMI data fell to 48.2 from the previous 49.4. However, the US Services PMI surprisingly rose to 51.3 from 50.8.

"The Dollar Index rose 0.58 percent to 102.55, while the 10-year US Treasury (UST) yield fell 1bps to 3.91 percent. Last week, the US Dollar tended to weaken, especially after the Fed's dovish stance at the FOMC meeting. The Dollar Index fell 1.4 percent," he explained to VOI, Monday, December 18.

Josua assesses that the movement of the rupiah on Monday 18 December will move flat (sideways) amid strengthening risk-on sentiment in Asian markets. However, the rupiah tends to weaken following trade balance data which recorded a lower surplus compared to the previous period.

The trade surplus fell to 2.41 billion US dollars in November 2023 compared to October 2023 of 3.47 billion US dollars in line with increasing oil imports due to strong domestic demand.

According to Josua, the depreciation of the Rupiah reversed after the PBoC announced that they would inject 112 billion US dollars to support economic recovery.

Apart from that, last week the 10-year tenor bond yield fell 4bps to 6.57 percent and government bond trading volume recorded an average of IDR 17.41 trillion last week, higher than the previous week which averaged IDR 13.17 trillion.

Josua estimates that the Rupiah will move in the range of IDR 15,450 per US dollar - IDR 15,550 per US dollar.