Rupiah weakens to Rp16,997 per US dollar at close of Monday trading
The value of the rupiah at the close of trading in Jakarta on Monday morning weakened by 39 points or 0.23 per cent to Rp16,997 per US dollar from the previous close of Rp16,958 per US dollar.
According to Muhammad Amru Syifa, Research and Development analyst at Indonesia Commodity & Derivatives Exchange (ICDX), pressure on the rupiah is driven by increased demand for safe-haven assets amid geopolitical uncertainty. “Pressure on the rupiah primarily stems from US dollar strength in global markets, coupled with rising demand for safe-haven assets amidst geopolitical uncertainty, particularly the ongoing conflict in the Middle East,” he said.
Additionally, market participants are monitoring developments in US inflation, which remains at approximately 2.4 per cent on an annual basis. Relatively stable inflation reinforces expectations that the Federal Reserve is likely to maintain interest rates at elevated levels for an extended period. These conditions tend to support US dollar strength and place pressure on developing country currencies, including the rupiah.
Externally, markets continue to monitor dynamics of the Middle East conflict, which has the potential to drive energy price increases and increase volatility in global financial markets.
Domestically, the rupiah remains supported by relatively solid economic fundamentals, including controlled inflation, maintained macroeconomic stability, and Indonesia’s continued trade surplus performance.
To counter pressure on the rupiah, the government and Bank Indonesia are said to be able to continue strengthening policy coordination to maintain financial market stability, including through measured intervention in the foreign exchange market and ensuring sufficient dollar liquidity in the domestic market.
“Stability in the foreign exchange market and dollar liquidity availability are important for ensuring smooth international trade transactions, limiting exchange rate volatility, and maintaining investor confidence in the domestic economy,” Amru stated.
The Jakarta Interbank Spot Dollar Rate (JISDOR) set by Bank Indonesia also weakened to Rp16,990 per US dollar from the previous level of Rp16,934 per US dollar.