Rupiah Strengthens as US Inflation Data Comes in Lower Than Expected

Jakarta (ANTARA) - The rupiah exchange rate strengthened by 5 points or 0.03 per cent at the opening of trading in Jakarta on Monday, moving to Rp16,831 per US dollar from the previous Rp16,836 per US dollar.

Doo Financial Futures currency analyst Lukman said the rupiah’s appreciation was driven by US inflation data coming in lower than expected. “The rupiah has the potential to strengthen against the US dollar, which has weakened following lower-than-expected US inflation data,” he told ANTARA in Jakarta on Monday.

US inflation data recorded a 0.2 per cent month-on-month (MoM) increase, lower than the anticipated 0.3 per cent. On a year-on-year (YoY) basis, US inflation declined from 2.7 per cent to 2.4 per cent, below the forecast of 2.5 per cent.

“The decline in US inflation was caused by the impact of tariffs, which has begun to dissipate,” Lukman explained.

However, he continued, the strengthening is expected to be limited given that domestic sentiment generally remains negative due to a credit rating downgrade, float demands from Morgan Stanley Capital International (MSCI), as well as the budget deficit and the prospect of interest rate cuts by Bank Indonesia (BI).

Additionally, the weakening of the US dollar was said to be not particularly significant, as Non-Farm Payrolls (NFP) data released several days earlier came in far stronger than expected.

Based on these factors, the rupiah is predicted to trade in the range of Rp16,750 to Rp16,900 per US dollar.