Rupiah Weakens as More Deposits Are Converted into Foreign Currency
The rupiah weakened on Tuesday, affected by pressure in domestic share and bond markets and an increase in the conversion of bank deposits into foreign currency.
Jakarta (ANTARA) - The rupiah closed down 21 points, or 0.12 per cent, at Rp18,156 per US dollar, compared with the previous close of Rp18,135, amid a high level of savings being converted into foreign currency.
Bank Woori Saudara analyst Rully Nova said the rupiah’s decline was influenced by the high level of public savings being converted from rupiah into foreign currencies in the banking sector.
“The rupiah weakened today, affected by domestic pressure in the share and bond markets, and an increase in the conversion of deposits into foreign currency in the banking sector,” he told ANTARA in Jakarta on Tuesday.
He said the 20 per cent increase in foreign-currency deposits indicated a strong public preference for holding US dollars as a hedge against the possibility of further rupiah depreciation. This could ultimately risk triggering a shortage of US dollar liquidity in the domestic market.
Other sentiment came from the Jakarta Composite Index (JCI), which fell through the 5,300 level, while the bond market saw an inverted yield curve: yields on benchmark 10-year government bonds were lower than those on bonds with maturities of eight to nine years.
Even so, several external factors in global markets could limit the rupiah’s decline. These include falling oil prices, a 1.8-basis-point easing in US Treasury yields to 4.97 per cent, and fading expectations of an increase in the Federal Reserve’s benchmark interest rate.
According to Anadolu, West Texas Intermediate (WTI) crude for December delivery fell by US$1.51, or 1.46 per cent, to close at US$101.76 a barrel on the New York Mercantile Exchange.
Brent crude for December delivery also fell, by 91 cents, or 0.78 per cent, to close at US$115.81 a barrel on the ICE Futures Exchange in London.
As for the Federal Reserve, the US central bank is highly likely to keep interest rates unchanged at its monetary policy meeting this week, although persistent inflation means a rate rise remains possible.
Despite high inflation, Federal Reserve Chair Kevin Warsh gave no clear forward guidance at a recent meeting of the International Monetary Fund and World Bank in Bangkok, Thailand.
His remarks, together with cautious comments from Federal Reserve Vice-Chair Philip Jefferson and Michelle Bowman, reinforced market expectations that the Fed would wait for more data before taking action.
According to CME Group, there is a 90 per cent probability that the Fed will keep rates unchanged this week, while 10 per cent of market participants expect a rate rise in the near future.
Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened on Tuesday, to Rp18,139 per US dollar from Rp18,116 previously.