Rupiah Strengthens Driven by Combination of Domestic Sentiments
Jakarta (ANTARA) - The rupiah exchange rate at the close of trading on Friday afternoon strengthened by 129 points, or 0.71 percent, to Rp17,860 per US dollar from the previous Rp17,989 per US dollar.
Permata Bank Chief Economist Josua Pardede assessed that the rupiah’s strengthening was influenced by a combination of domestic sentiments that eased market concerns regarding the fiscal outlook.
“The domestic factors helping the rupiah are stronger coordination between Bank Indonesia and the government, the benchmark interest rate hike, the attractiveness of rupiah asset yields, and relatively better State Budget data for May. The State Budget deficit is still under control, the primary balance is in surplus, and state revenue grew quite strongly,” he told ANTARA in Jakarta on Friday.
According to him, Bank Indonesia’s move to raise the benchmark interest rate provided a cushion for the rupiah. Additionally, the strengthening attractiveness of Bank Indonesia Rupiah Securities (SRBI) and higher yields on Government Securities (SBN) are beginning to attract some foreign funds again, particularly into SRBI and short- to medium-term SBNs.
“However, the market is still waiting for proof that this fiscal discipline can be maintained until the end of the year, especially because government spending usually increases in the second half and the risk of energy subsidies remains large,” Josua stated.
“News from the Middle East is making the US dollar attractive again as an asset perceived to be safer. At the same time, market participants are still observing the direction of the US central bank’s interest rate and US bond yields. As long as the US dollar remains strong and oil prices are prone to volatility, the rupiah remains vulnerable even though Bank Indonesia has raised interest rates,” he said.
The Bank Indonesia Jakarta Interbank Spot Dollar Rate (JISDOR) today also moved stronger to the level of Rp17,921 per US dollar from the previous Rp17,981 per US dollar.