The rupiah exchange rate against the United States (US) dollar has started to strengthen over the last 3 days and has increasingly consistently left the level of IDR 15,700/US$, but on a weekly basis it is still willing to close lower again.
According to Refinitiv data, the Garuda currency in the week ending Friday (13/10/2023) was at IDR 15,680/US$. This position continued the trend of strengthening the rupiah for three consecutive days. Meanwhile, on a weekly basis, the rupiah still weakened relatively 0.48% against the US dollar.
The daily strengthening of the rupiah is in line with the Greenback which is starting to weaken, last Friday the DXY dollar index was at 106.34 or down 0.24% compared to the close of trading on Thursday (12/10/2023) which closed at 106.60.
However, on a weekly basis the rupiah still has to be willing to fall against the US dollar, because the country’s currency tested the position of IDR 15,730/US$ last Tuesday. Therefore, the weakening this week continues the trend of the rupiah collapsing over the last six weeks.
When compared with other countries, the weakening of the rupiah this week was the second largest after the South Korean won. Meanwhile, the strongest in Asia this week was the Thai dollar, rising 1.84%, followed by the Hong Kong dollar 0.09%.
The main sentiment that pushed the rupiah to weaken this week was US inflation, which was hotter than expected. Data from the US Bureau of Labor Statistics reported that the consumer price index (CPI) was recorded at 3.7% (year on year/yoy) in September 2023, the same pace as the previous month. However, this figure is higher than economists’ projection of 3.6%.
Meanwhile, on a monthly basis (month to month/mtm), inflation slowed from 0.6% in August 2023 to 0.4% in August 2023, partly due to low pressure from energy prices. However, core inflation, which does not take into account volatility in energy and food prices, remained stable at 0.3% (mtm). Core inflation fell slightly from 4.3% to 4.1% on an annual basis (yoy).
The inflation data disappointed the market because it reflected the still hot US economy. This condition could lead to tighter policies by the US central bank, The Federal Reserve (The Fed), in the future. September inflation is still far from the Fed’s target of 2%.
However, even though the rupiah weakens weekly, over the last three days the rupiah has started to strengthen. This is because China’s export and import data has improved annually.
Exports from China shrank 6.2% yoy to US$299.13 billion in September 2023, following a decline of 8.8% in the previous month, and better than the forecast decline of 7.6%. Meanwhile, import data to China shrank 6.2% yoy to US$221.4 billion in September 2023, slowing from a decline of 7.3% in the previous month.
Source : CNBC