Rupiah weakens alongside strong US PMI data

Global sentiment remains the primary factor weighing on the rupiah today.

The rupiah exchange rate against the US dollar closed weaker at the end of Thursday’s trading, dropping by 98 points or 0.55 per cent to Rp17,916 per US dollar, compared to the previous close of Rp17,818 per US dollar.

Muhammad Amru Syifa from the Research and Development division of the Indonesia Commodity & Derivatives Exchange (ICDX) stated that the rupiah’s weakness was influenced by the strong growth in the US Purchasing Managers’ Index (PMI).

“Global sentiment remains the main factor weighing on the rupiah today. The US dollar strengthened after US Flash PMI data for September showed business activity growing quite strongly, with the Composite PMI rising to 58.4 from 56.0 in August, reaching its highest level since July 2021,” he told ANTARA in Jakarta on Thursday.

This data indicates that the US economic momentum remains solid, he continued, while cost and inflation pressures also remain persistent, ensuring that expectations for relatively tight Federal Reserve policies are maintained.

This condition is considered to make the US dollar and dollar-based assets remain attractive, thereby exerting pressure on emerging market currencies, including the rupiah.

Regarding domestic sentiment, the focus stems from Bank Indonesia’s decision to maintain the BI-Rate at 5.75 per cent and its reaffirmation of commitment to maintain the stability of the rupiah exchange rate through the optimisation of various monetary instruments.

“The position of foreign exchange reserves, which remain strong at around 146.5 billion US dollars, is also one of the factors that can help maintain external resilience,” said Amru.

Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also moved weaker today to the level of Rp17,893 per US dollar from the previous Rp17,803 per US dollar.