Rupiah strengthens following 'dovish' statements from Fed officials

Jakarta (ANTARA) - Doo Financial analyst Lukman Leong stated that the strengthening of the rupiah was influenced by dovish statements from Federal Reserve officials.

The rupiah exchange rate against the US dollar at the opening of trading on Friday moved up by 51 points, or 0.29 per cent, to Rp17,628 per US dollar, compared to the previous close of Rp17,679 per US dollar.

“The rupiah is expected to strengthen against the US dollar following dovish statements from Fed official Christopher Waller, which weakened the US dollar and lowered the prospects of interest rate hikes by the Fed in September,” he told ANTARA in Jakarta on Friday.

Quoting Anadolu, Waller stated that he sees promising signs of disinflation across the US economy. This indicates that he could potentially support a decision to maintain the benchmark interest rate at its current level during the next Fed meeting.

This signal prompted bond traders to sharply reduce the probability of a September interest rate hike to an even 50-50 chance, down from the 63 per cent probability priced in by the market just one day earlier.

“Waller signalled not to raise interest rates if inflationary pressures continue to subside. Expectations for an interest rate hike in September have dropped from 63 per cent to 50 per cent,” said Lukman.

Based on these factors, the rupiah exchange rate is predicted to range between Rp17,600 and Rp17,750 per US dollar.