Rupiah Weakens to Rp17,669 per US Dollar, Pressured by Rising CPI

The exchange rate of the rupiah against the US dollar closed weaker in trading on Monday (14/9). The rupiah fell 58 points or 0.33% to the position of Rp17,669 per US dollar, compared to the previous trading close which stood at the level of Rp17,611 per US dollar.

Currency analyst and Director of Laba Forexindo Berjangka, Ibrahim Assuabi, stated that the rupiah’s weakness was partly influenced by the rise in the United States Consumer Price Index (CPI).

“August inflation data showed a monthly increase of 0.3% in the core consumer price index (excluding food and energy costs),” he said on Monday.

Quoting Xinhua, the annual United States Consumer Price Index (CPI) reached 3.4%. Meanwhile, core inflation, which does not account for volatile food and energy components, was recorded at 2.4%.

According to Ibrahim, this increase in inflation has strengthened market expectations that the Federal Reserve (The Fed) potentially raises interest rates for the first time in three years at the meeting taking place this week. The market currently estimates the probability of a Fed rate hike in September at approximately 88%.

“An interest rate hike could also trigger political tension for the Fed. President Donald Trump again called for a reduction in interest rates on Sunday (13/9), continuing his latest criticism of the central bank’s policy stance,” he revealed.

In line with the rupiah’s movement in the market, Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened on Monday. JISDOR was recorded at the level of Rp17,635 per US dollar, down from its previous position of Rp17,611 per US dollar.