Rupiah predicted to strengthen as market appetite for EM assets increases

The rupiah exchange rate is expected to strengthen today, trading in the range of Rp17,820 to Rp17,870, influenced by the global factor of increased risk appetite among market players for emerging market (EM) assets. This comes after the yen fell, the oil price trend declined to around US$70 per barrel, and the dollar index began to tame.

The rupiah exchange rate on Tuesday morning weakened by 32 points, or 0.18 percent, to Rp17,883 per US dollar compared to the previous close of Rp17,851 per US dollar.

The Japanese yen weakened to its lowest level against the US dollar in nearly 39 years as expectations of further US interest rate hikes continued to pressure the Japanese currency. The fall of the yen was due to market players abandoning safe assets identified with the yen and pursuing high-yield assets and stock markets with upward momentum in technology company shares.

Looking at domestic sentiment, the high interest of market players in government bonds and Bank Indonesia (BI) instruments is seen as reflecting market risk appetite. The yield on Indonesian government bonds showed a decline, indicating increased market interest, with the 5-year tenor down 5.2 basis points to 7.08 percent, the 16-year down 4.6 bps to 7.3 percent, and the 6-8 year tenors each down 2.4 bps to 7.1 percent and 7.22 percent, while SRBI (Bank Indonesia Rupiah Securities) continued to be sought after.