Rupiah weakens after BI decision to hold benchmark interest rate

The rupiah was expected to weaken today, influenced by domestic factors following the Bank Indonesia Board of Governors’ decision to keep its benchmark interest rate at 5.75 per cent.

Jakarta (ANTARA) – The rupiah weakened by 11 points, or 0.06 per cent, against the US dollar at the opening of trading on Thursday, to Rp18,033 per dollar, compared with the previous close of Rp18,022.

Bank Woori Saudara analyst Rully Nova said the rupiah’s weakness was influenced by the outcome of Bank Indonesia’s (BI) Board of Governors meeting, which kept the benchmark interest rate unchanged.

“The rupiah is expected to weaken today, influenced by domestic factors following the Board of Governors’ decision to keep the benchmark rate at 5.75 per cent,” he told ANTARA in Jakarta on Thursday.

The deposit facility rate was raised by 25 basis points to 5 per cent, while the lending facility rate was kept at 6.5 per cent.

BI also reduced the average reserve requirement for banks by 2 percentage points to strengthen the availability of rupiah liquidity.

More specifically, the reserve requirement for conventional commercial banks was cut from 9 per cent to 7 per cent. For Islamic commercial banks and Islamic business units, it was reduced from 7.5 per cent to 5.5 per cent.

On MSCI, BI was said to remain alert to risks in the domestic stock market, including the possibility of foreign capital outflows, following MSCI’s announcement of proposed changes to the classification of Indonesia’s capital market.

Regarding global sentiment, Rully said Indonesian government bonds could see increased demand alongside stronger demand for US government bonds, which had pushed yields down to 5.1 per cent.

Based on these factors, the rupiah was forecast to trade between Rp18,000 and Rp18,120 per US dollar.