Rupiah strengthens following dovish statements from Fed officials

Jakarta (ANTARA) - The rupiah exchange rate strengthened by 15 points or 0.09 percent to Rp16,987 per US dollar on Tuesday morning from the previous close at Rp17,002 per US dollar. Currency analyst from Doo Financial Futures, Lukman Leong, said the rupiah’s appreciation was influenced by dovish statements from Federal Reserve (Fed) officials. “The rupiah has the potential to strengthen against the US dollar following dovish statements from Fed Chair (Jerome) Powell and Fed official William (Federal Reserve Bank of New York John C. Williams),” he told ANTARA in Jakarta on Tuesday. Citing Anadolu, Powell reportedly conveyed that the US central bank does not see an urgent need to raise interest rates in response to the recent oil price shock. The reason is that inflation expectations remain contained, and the current policy tightening could burden the economy later on. Powell stated that the Fed has not reached the point where it needs to respond to higher energy prices with interest rate hikes, as policymakers are still unaware of the full economic impact of the Iran war and tariff-related price pressures. Oil prices have surged more than 45 percent in a month following the US-Zionist Israel attack on Iran’s oil infrastructure and the Gulf, as well as the closure of the Strait of Hormuz. Therefore, the Fed’s interest rate, maintained in the 3.5-3.75 percent range, is considered by Powell to be in a good position amid geopolitical tensions and their impact on inflation. He warned that raising interest rates in response to the oil supply shock could prove counterproductive, as monetary policy works with a lag and may only start to restrain growth after the impact of the oil price increase has subsided. Meanwhile, Williams alluded to the weakening US labour market. Lukman explained that the labour market is in poor condition, as evidenced last month by the US economy losing 92,000 jobs. “As an illustration, for the US economy, the ideal job growth is at least above 100,000 to 150,000 per month,” he said. On the other hand, Lukman predicts that the rupiah’s strengthening will be limited given the generally negative market sentiment and rising oil prices. Based on these factors, the rupiah is forecasted to range between Rp16,950 and Rp17,050 per US dollar.