Rupiah strengthens following Bank Indonesia stabilisation measures
The rupiah exchange rate at the close of trading today strengthened by 114 points, or 0.63 percent, to Rp17,944 per US dollar from the previous Rp18,058 per US dollar.
Muhammad Amru Syifa, Research and Development at the Indonesia Commodity & Derivatives Exchange (ICDX), said the rupiah’s recovery came amid improving market sentiment and stabilisation measures undertaken by Bank Indonesia (BI).
“After touching its weakest level at Rp18,190 per US dollar earlier in the week, the rupiah began to show signs of recovery as market sentiment improved and Bank Indonesia carried out stabilisation steps,” he told ANTARA in Jakarta on Wednesday.
Nevertheless, the rupiah’s movement is said to remain potentially volatile as the market continues to monitor global and domestic sentiment developments.
Investor attention is currently still focused on the developing conflict in the Middle East, which could affect market appetite for risky assets.
In addition, he continued, market players are also awaiting the release of US inflation data, which will provide an important clue regarding the direction of the Federal Reserve’s interest rate policy.
“If US inflation remains high, the US dollar has the potential to strengthen because the market will anticipate interest rates staying higher for longer. Conversely, if inflation is lower than expected, pressure on emerging market currencies, including the rupiah, could ease,” Amru explained.
Looking at domestic factors, positive sentiment came from Bank Indonesia’s decision to raise its benchmark interest rate by 25 basis points to 5.50 percent.
This move is considered capable of increasing market confidence in BI’s commitment to maintaining exchange rate stability.
“This can be seen from the rupiah’s strengthening following the interest rate hike announcement. In addition, BI’s active communication with global investors has also helped to maintain optimism regarding Indonesia’s economic and financial market prospects,” he said.
Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) today also moved stronger to Rp17,971 per US dollar from the previous Rp18,141 per US dollar.