Rupiah weakens under pressure from rising US Treasury yields
The Rupiah continues to face pressure from the strengthening US Dollar and rising US Treasury yields, amidst increasing expectations of a more hawkish policy from the Federal Reserve.
At the close of trading on Wednesday, the Rupiah exchange rate against the US Dollar weakened by 19 points, or 0.11 per cent, to Rp17,763 per US Dollar, compared to the previous close of Rp17,744 per US Dollar.
Muhammad Amru Syifa from the Research and Development department of the Indonesia Commodity & Derivatives Exchange (ICDX) stated that the Rupiah’s weakness was influenced by the rise in US Treasury yields.
“The Rupiah is still facing pressure from the strengthening US Dollar and the rise in US Treasury yields, amidst increasing expectations of a tighter Fed policy,” he told ANTARA in Jakarta on Wednesday.
Rising oil prices due to increased geopolitical tensions are also considered a concern, as they have the potential to heighten global inflationary pressures.
On the domestic front, sentiment towards the Rupiah was affected by the release of Indonesia’s Manufacturing PMI for August, which returned to the contraction zone at a level of 49.8. This figure indicates that manufacturing activity is still facing pressure, serving as a negative sentiment for the Rupiah.
Meanwhile, August inflation increased to 3.19 per cent year-on-year from 2.88 per cent in July, though it remains within Bank Indonesia’s (BI) target range. This condition may be taken into consideration by BI when determining the direction of interest rate policy.
On the other hand, Indonesia’s trade balance recorded a surplus of approximately US$120 million in July, following a deficit of US$450 million in the previous month.
“The trade surplus provides support to the Rupiah through the supply of foreign exchange, although the value is relatively slim because import growth of 27.02 per cent year-on-year was significantly higher than export growth of 6.05 per cent,” Amru explained.
Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened today to the level of Rp17,770 per US Dollar from the previous level of Rp17,727 per US Dollar.