TEMPO.CO, Jakarta - The rupiah exchange rate against the US dollar at the close of trading on Thursday weakened by 19 points or 0.11 percent to Rp17,936 per US dollar, down from the previous close of Rp17,917 per US dollar.
Research & Development of the Indonesia Commodity and Derivatives Exchange (ICDX) Tiffani Safinia stated that this weakening was influenced by strong expectations that the Federal Reserve (The Fed) would maintain high interest rates for longer.
"The rupiah's weakening to Rp17,936 per US dollar was primarily influenced by global sentiment, namely the continued strength of the US dollar due to expectations that the Federal Reserve (The Fed) will maintain high interest rates for longer," she said on Thursday, as reported by ANTARA.
ICDX reports that the market still expects at least one interest rate hike by the end of the year. Meanwhile, the U.S. central bank is expected to keep interest rates the same at next week's Federal Open Market Committee (FOMC) meeting, while monitoring inflation and economic conditions.
This condition is considered to encourage global capital flows to continue toward dollar-based assets, thereby putting pressure on developing country currencies, including the rupiah.
Looking at the domestic side, he continued, Bank Indonesia's (BI) decision to maintain the BI Rate at 5.75 percent demonstrates a focus on maintaining exchange rate stability and inflation.
"However, the rupiah's strengthening remains limited because the interest rate differential with the U.S. is not yet sufficient to attract foreign capital inflows, amidst still-high domestic foreign exchange demand," Tiffani said.
Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened today to Rp17,919 per US dollar from Rp17,909 previously.
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