Rupiah predicted to strengthen in Monday trading

Rully Nova, an analyst at Bank Woori Saudels, expects the rupiah to move stronger against the US dollar in Monday’s trading, following dovish statements from Federal Reserve Governor Kevin Warsh.

“The rupiah has room to strengthen today within the range of Rp17,920–Rp17,970, influenced by global factors such as the weakening US dollar index following the dovish statements from the Fed Governor, which are driving market expectations regarding the cancellation of interest rate hikes this year, as well as continuously falling oil prices,” he told ANTARA in Jakarta on Monday.

At the opening of Monday morning’s trading, the rupiah exchange rate against the US dollar initially weakened by 29 points or 0.16 per cent to Rp17,992 per US dollar, compared to the previous close of Rp17,963 per US dollar.

Citing Anadolu, the market previously estimated an 82 per cent chance of an interest rate hike in October. However, after US non-farm payroll data for June came in lower than market expectations, the probability of an interest rate hike in September dropped from 67 per cent to 63 per cent, supported by optimism regarding geopolitical developments.

According to Rully, the Fed Governor is being more cautious (dovish) regarding future US inflation conditions due to the impact of rising oil prices in the first half of the year and its influence on inflation in the second half.

Nevertheless, the labour market data is more concerning for the Fed, which will have a deeper impact on the US economy.

“From a domestic perspective, economic data such as fiscal space, the trade balance deficit, and foreign exchange reserves remain weighing factors for the strengthening of the rupiah,” he stated.