Rupiah Strengthens to Rp17,860 per US Dollar, Supported by Domestic Sentiment

The rupiah exchange rate showed positive performance at the close of trading at the end of the week. The rupiah strengthened significantly by 129 points, or 0.71 percent, to the level of Rp17,860 per US dollar, compared to the previous position of Rp17,989 per US dollar. Permata Bank Chief Economist Josua Pardede explained that the rupiah’s strengthening was driven by a combination of domestic sentiments that succeeded in easing market concerns about the national fiscal condition. “The domestic factors that helped the rupiah were stronger coordination between Bank Indonesia (BI) and the government, the increase in the benchmark interest rate, and the attractiveness of domestic asset yields. In addition, the relatively better May state budget (APBN) data, with a controlled deficit and a primary balance surplus, also provided confidence for investors,” Josua said in Jakarta on Friday (12/6). Bank Indonesia’s move to raise its benchmark interest rate was considered an effective cushion for the rupiah amid global fluctuations. Furthermore, Bank Indonesia Rupiah Securities (SRBI) and Government Securities (SBN) instruments have begun to attract foreign investor interest again, particularly in short and medium tenors. However, Josua noted that the market is still in a wait-and-see mode regarding the consistency of fiscal discipline until the end of the year. This is due to the potential for increased government spending in the second semester and the risk of energy subsidies that still looms. The rupiah’s strengthening was also reflected in the Jakarta Interbank Spot Dollar Rate (JISDOR), which strengthened to Rp17,921 per US dollar from the previous position of Rp17,981 per US dollar. On the other hand, the rupiah’s upward momentum remains overshadowed by the persistent strength of the US dollar globally. “As long as the US dollar remains strong and US Treasury yields are still attractive, the rupiah will remain vulnerable even though BI has raised its interest rate. Market participants are still observing the direction of the US central bank’s interest rate policy and global oil price fluctuations,” Josua concluded.