Rupiah Opens Weaker Against US Dollar Following Fed Rate Hike
The exchange rate of the Rupiah against the US Dollar opened weaker in trading on Thursday (17/9). This weakening was triggered by the move by the US central bank, the Federal Reserve (The Fed), which raised its benchmark interest rate amidst persistently high US inflation.
Based on trading data on Thursday morning, the Rupiah moved weaker by 43 points or 0.24 per cent to the position of Rp17,739 per US Dollar. At the close of the previous trading session, the Rupiah stood at the level of Rp17,696 per US Dollar.
Muhammad Amru Syifa from the Research and Development unit of the Indonesia Commodity & Derivatives Exchange (ICDX), explained that the current movement of the Rupiah is heavily influenced by US monetary policy dynamics and global market conditions.
“The Fed’s decision provides support for the US Dollar and maintains US Treasury yields at high levels, thus limiting the space for Rupiah appreciation,” Amru stated in Jakarta on Thursday (17/9).
On Wednesday (16/9), the Fed officially raised the benchmark interest rate by 25 basis points to 3.75-4.00 per cent. This step was taken to curb inflation in the United States, which remains above the target.
The interest rate hike triggered a global strengthening of the US Dollar and kept US government bond yields high. This condition automatically exerts pressure on emerging market currencies, including the Rupiah.
Despite the pressure, Amru noted there is slight room for stability for regional currencies due to the decline in global oil prices as supply concerns began to subside.
From a domestic perspective, market participants are still closely monitoring fiscal conditions and national financial market stability. The main focus for investors is on the government’s ability to maintain the credibility of the State Budget (APBN) amidst massive external shocks.
In the short term, the Rupiah is predicted to move volatile with a tendency to remain under pressure. Amru projects the Rupiah’s movement range to be between Rp17,650 and Rp17,800 per US Dollar.
“Subsequent movements will depend heavily on the future direction of Fed policy, developments in US Treasury yields, and sentiment regarding domestic fiscal conditions,” he concluded.