Rupiah weakens amid higher probability of Fed policy tightening

The rupiah exchange rate weakened by 93 points, or 0.52 percent, at Wednesday’s close, reaching Rp17,952 per US dollar from the previous Rp17,859 per US dollar. Money market analyst Ibrahim Assuaibi attributed the rupiah’s depreciation to a higher probability of monetary tightening by the Federal Reserve. “Traders now see a much higher probability of Fed tightening in the coming months following last week’s policy meeting and hawkish comments from officials. The market sees around a 70 percent probability of a rate hike in September, and fully expects another in December,” he stated in a written note in Jakarta on Wednesday. Another sentiment stemmed from the uncertainty surrounding the agreement between Iran and the US, following US President Donald Trump’s statement that Iran had agreed to unlimited nuclear inspections. Tehran, however, conveyed that it made no such concessions in the negotiations. “This extended review follows concerns that emerged earlier this year regarding market accessibility, with the index provider freezing changes to Indonesian equity indices in January due to investability issues,” Ibrahim said. He added that the review process of Indonesia’s market status is therefore still ongoing and will be a key focus for market participants in the coming months. The evaluation result is considered important as it can provide an indication of international investors’ perception of the quality, openness, and efficiency of the domestic capital market. Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also moved weaker on the day, to Rp17,955 per US dollar from the previous Rp17,868 per US dollar.