Rupiah Declines as Markets Wait for US FOMC Minutes

Armfalcon.com, JAKARTA — The rupiah exchange rate traded between banks in Jakarta in early trading Wednesday (12/4/2023) slumped as the market waited for the minutes of the Federal Open Market Committee (FOMC) or the policy board meeting of the United States Central Bank regarding policy the benchmark interest rate.

On Wednesday morning, the rupiah exchange rate opened lower by three points or 0.02 percent to Rp 14,889 per US dollar compared to the position at the previous close of Rp 14,886 per US dollar.

“The rupiah still has limited potential for strength. Investors are looking forward to tonight’s US inflation data and the FOMC minutes,” said DCFX Futures analyst Lukman Leong. Between in Jakarta, Wednesday (12/4/2023).

Lukman said that inflation in the United States (US) on an annual basis (year on year/yoy) is expected to slow to 5.2 percent from 6.0 percent, causing pressure on the US dollar.

Meanwhile, there is no expectation at the FOMC tonight. However, the US Central Bank or the Fed is expected to be more dovish related to its benchmark interest rate policy from before.

Domestically, investors are looking forward to data on Indonesian retail sales in February which have been steadily declining in the last six months. However, if retail data improves, the rupiah has the potential to continue strengthening.

Lukman said, the recent strengthening of the rupiah was supported by domestic factors with strong demand for Government Securities (SBN), especially from foreigners so that the flow of foreign funds continued to the domestic market. Investor interest in investing in the domestic financial market is influenced by good Indonesian economic data and strong growth, relatively high interest rates, expectations of a large increase in foreign exchange reserves with the revision of Government Regulation (PP) Number 1 of 2019 concerning Export Proceeds of Foreign Exchange.

In the fourth quarter of 2022, Indonesia’s economic growth was recorded to remain high at 5.01 percent (yoy), amidst a slowing trend in global economic growth. With these developments, Indonesia’s overall growth in 2022 was recorded at 5.31 percent (yoy), much increased from the previous year’s achievement of 3.7 percent (yoy).

Going forward, economic growth in 2023 is predicted to remain strong in the range of 4.5-5.3 percent, driven by increased domestic demand, both for household consumption and investment.

In addition, net foreign capital inflows reached IDR 4.23 trillion on the domestic financial market during the April 3-5 2023 period. The foreign capital inflows came from the Government Bonds (SBN) market worth IDR 2.13 trillion and the stock market of IDR IDR 2.10 trillion.

Lukman estimates that the rupiah has the opportunity to move in the range of IDR 14,850 per US dollar to IDR 15,000 per US dollar.

On Tuesday (11/4/2023) the rupiah closed increasing 16 points or 0.11 percent to the position of IDR 14,886 per US dollar compared to the position at the close of the previous trade of IDR 14,902 per US dollar.