Rupiah strengthens as market responds positively to BI rate decision

The rupiah exchange rate strengthened by 59 points, or 0.33 percent, to Rp17,930 per US dollar on Friday morning, compared to the previous close of Rp17,989 per US dollar. Research and Development analyst at the Indonesia Commodity & Derivatives Exchange (ICDX), Muhammad Amru Syifa, said the rupiah’s appreciation was influenced by a positive market response to Bank Indonesia’s decision to raise its benchmark interest rate. “The rupiah’s movement continues to receive support from Bank Indonesia’s decision to raise the benchmark rate to 5.50 percent. This policy received a positive response from foreign investors and boosted interest in domestic assets, helping to maintain market participants’ optimism towards Indonesia’s financial markets,” he told ANTARA in Jakarta on Friday. Looking at external sentiment, the rupiah still faces pressure from a strengthening US dollar after US Producer Price Index (PPI) data released on 11 June showed higher-than-expected inflationary pressures. The data is seen as reinforcing the view that the Federal Reserve will maintain interest rates at high levels for a longer period. At the same time, Amru added, the market is also observing developments in negotiations between the United States and Iran. Hopes of reaching an agreement between the two countries could potentially ease geopolitical tensions and maintain global energy supply stability, which could help suppress world oil prices. “For Indonesia, which still depends on oil imports, this condition could reduce pressure on foreign exchange needs and provide positive sentiment for the rupiah. However, since there is no final agreement yet, market participants still tend to be cautious,” he said. Based on these factors, the rupiah is expected to trade in the range of Rp17,850 to Rp17,980 per US dollar.