Rupiah Increases After The Fed Signals a Pause in Interest Rate Increases

Armfalcon.com, JAKARTA — The rupiah exchange rate (exchange rate) traded between banks in Jakarta at the start of trading Thursday, rose after the United States (US) Central Bank or The Fed gave a signal to pause raising the benchmark interest rate. On Thursday (4/5/2023) morning, the rupiah opened, increasing 107 points or 0.73 percent to the position of IDR 14,585 per US dollar compared to the position at the close of the previous trade of IDR 14,692 per US dollar.

“Today we estimate that the rupiah will remain stable with a tendency to strengthen. The main factor is the signal from the Fed to stop increasing interest rates,” said Rully Arya Wisnubroto, economist at Mirae Asset Sekuritas. Between in Jakarta, Thursday.

The dollar slipped against most of its major peers in early Asia on Thursday morning, after the US Federal Reserve opened the door for a break in its aggressive tightening cycle, although markets were buffeted by risk aversion amid a crash in US regional bank stocks.

The Fed on Wednesday (3/5/2023) raised its benchmark overnight rate by a quarter percentage point, as expected, but in doing so removed the language of its policy statement that it “anticipated” further rate hikes would be required.

That sent the US dollar broadly lower and government bond yields sliding, with traders taking the comments as a signal that a peak in US interest rates had been reached and moving their forecasts to a rate cut later this year.

Rully estimates that there is a high chance that US interest rates will be held at 5.25 percent at the Federal Open Market Committee meeting or the US Central Bank’s policy meeting board in June 2023.

Meanwhile from within the country, he said the market was waiting for the release of first quarter 2023 Gross Domestic Product data.

He projects that the rupiah will be traded in the range of Rp. 14,665 per US dollar to Rp. 14,725 per US dollar. On Wednesday (3/5/2023) the rupiah closed up 22 points or 0.15 percent to the position of IDR 14,692 per US dollar compared to the position at the previous close of trading at IDR 14,714 per US dollar.

source: between