Jakarta, CNBC Indonesia – The rupiah exchange rate closed higher on trading last Thursday (5/11/2020) at the level of Rp 14,380 per US $ and became the best currency in Asia.
The road to strengthening the rupiah will also be more spacious, especially if you look at the indications that the NDF (Non-Delivery Forward) exchange rate traded on foreign financial markets has fallen sharply, even breaking below IDR 14,300 / US $ last night in the New York trading session.
This strengthening of the rupiah was due to the weakening of the dollar on a global scale in the midst of awaiting the US Presidential Election. Dollar index or DXY fell sharply from the level of 94 to 92 this morning.
The weakening of the US dollar was due to investors starting to glance again at the financial assets of developing countries after stronger indications of Joe Biden’s victory in the US election against the incumbent Donald Trump.
Executive Director of the Department of Monetary Management of Bank Indonesia (BI) Nanang Hendarsah, when contacted by CNBC, said the monetary authority would make room for the Garuda currency.
“BI will provide room for the rupiah to continue to strengthen according to its fundamental value,” he said Friday (6/11/2020).
The current exchange rate level at Rp 14,380 is still considered undervalued so that it still has room to continue strengthening in line with the trade balance which posted a surplus in the last few months.
This is in line with weakening imports, but on the other hand, exporters have experienced an increase, especially commodity exports.
Thus, the overall current account is also expected to shift to a surplus in the third quarter of 2020, after a deficit of US $ 2.9 billion in quarter II / 2020.
If you take into account the inflation in September 2020 which was only 0.07% or 1.44% year to date, and with an estimate that it will be below the lower limit of the 2020 inflation target, then in calculation real, the current rupiah exchange rate is still “very undervalued” or too cheap.
He said the rupiah should also be able to strengthen if you take into account yield differential. The current 10-year SBN yield although down to 6.50% is still much higher than that yield state bonds peer Asia.
It is no wonder that yesterday, global investors began to hunt for SBN again. Foreign investors bought Rp 4.5 trillion in SBN yesterday.
In addition, he said, from a global perspective, the move by the Fed, or the US central bank, which is expected to continue to undertake quantitative easing (QE) will make dollar liquidity flood global financial markets and seep into developing countries.
Finally, the Fed’s commitment is to continue to purchase US government bonds of US $ 120 billion per month, which means that dollar liquidity will be more abundant in the market.
In addition, if the US $ 2.2 trillion US fiscal stimulus was rolled out during the Biden administration, if the Obama-era vice president won the US Presidential Election.
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