Rupiah Strengthens Amid Profit-Taking Against the US Dollar

The rupiah exchange rate strengthened at the close of trading today to Rp17,476 per US dollar from the previous Rp17,529 per US dollar. Muhammad Amru Syifa from the Research and Development of the Indonesia Commodity & Derivatives Exchange (ICDX) assessed that the rupiah’s strengthening was caused by profit-taking against the US dollar after it had experienced a fairly sharp strengthening. “The rupiah’s strengthening occurred amid profit-taking against the US dollar after it had previously experienced a fairly sharp strengthening following the release of US inflation data that exceeded market expectations,” he told ANTARA in Jakarta on Wednesday. It was recorded that the US annual inflation rate reached the highest level for April at 3.8% since May 2023, as reported by Anadolu. Market expectations were at 3.7% for April, while the March figure was at 3.3%. Investors are also said to be inclined to act cautiously while awaiting the release of US producer price index inflation data as well as developments from the meeting between US President Donald Trump and Chinese President Xi Jinping, which could influence the direction of global market movements. “Amid the high geopolitical tensions in the Middle East, some market participants have begun to reposition assets, thus reducing pressure on emerging market currencies somewhat,” Amru explained. From the domestic perspective, the rupiah received support from market optimism regarding Bank Indonesia’s (BI) steps, which are expected to remain active in maintaining exchange rate stability through interventions in the foreign exchange and bond markets. Additionally, he continued, there is speculation that BI may adjust interest rates to maintain the attractiveness of domestic assets and curb pressure from foreign capital outflows. “Other positive sentiment comes from the government’s efforts to strengthen domestic financial market stability, including maintaining liquidity and stabilising the government bond market. Nevertheless, the rupiah’s future movements are still expected to be volatile as the market continues to monitor the direction of The Fed’s policies, foreign capital flows, and global geopolitical risk developments,” he stated. Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) today also moved stronger to Rp17,496 per US dollar from the previous Rp17,514 per US dollar.