Rosseno Aji Nugroho, CNBC Indonesia
Market
Thursday, 05/10/2023 08:59 IWST
Photo: Officers count money at the Asian Dollar money exchange place, Melawai, Blok M, Jakarta, Tuesday, (3/10). (CNBC Indonesia/Muhammad Sabki)
Jakarta, CNBC Indonesia – The Garuda currency has again surrendered to the might of the United States (US) dollar. In trading ending Wednesday (4/10/2023), the rupiah exchange rate against the US dollar closed at IDR 15,625/US$, falling 0.32% daily.
This indicates that the rupiah has weakened for three consecutive days, in fact its value has become the worst in the last nine months.
Senior Deputy Governor of Bank Indonesia (BI) Destry Damayanti said the weakening of the rupiah was overshadowed by the sentiment of the US central bank, the Federal Reserve (The Fed), which still has the potential to increase the benchmark interest rate at the Federal Open Market Committee (FOMC) meeting at the end of this year.
According to Destry, uncertainty from the Fed has an impact on global currencies, including Indonesia. The uncertainty stemming from the Fed official’s statement made the market excited and panicked. This condition was compounded by an increase in FFR of 25 basis points to 5.75%. This rate will be equivalent to the BI interest rate at 5.75%.
As a result, the US dollar index (DXY) rose and the 10-year RI SBN yield rose by 4.7 points to 7.01%, the highest since 2007.
“What’s happening is that our market is moving, bond yields are starting to rise, our rupiah is starting to come under pressure,” said Destry.
In the midst of these conditions, all parties are waiting for BI and government policies. The following is a summary of the views and suggestions of five economists and analysts regarding the weakening of the rupiah.
1. Bahana Securities
To CNBC Indonesia, Chief Economist of PT Bahana Sekuritas Satria Sambijantoro saw that the rupiah exchange rate was still ‘overvalued’ considering the deficit in the balance of payments and the small difference between Indonesian interest rates and other global assets.
“Imagine, the rupiah currency in 2023 will perform the same as the Hong Kong dollar, whose central bank implemented a ‘peg’ policy against the US dollar, even though BI adopted a ‘floating’ currency regime,” said Satria, quoted Thursday (5/10/2023) .
In other words, according to him, BI made quite a big intervention to maintain the rupiah exchange rate at Rp. 14,800 – 15,200 several periods ago. We calculated that the intervention amount was at least US$ 2 billion per month, in the May-September period.
He said that BI must now release the rupiah to a ‘fair value’ that better reflects its fundamentals. This step must also be accompanied by an increase in the BI rate to increase market confidence and smooth the depreciation of the rupiah exchange rate.
“After that, foreign dollars will flow in,” he stressed.
2. Bank Mandiri
Chief Economist of PT Bank Mandiri Tbk. Andry Asmoro assesses that the rupiah’s rebound all depends on the Fed’s future statements, especially regarding inflation and the Fed Fund Rate target.
“If US inflation is still high, the pressure for the USD to strengthen will also still be large,” he said when contacted by CNBC Indonesia.
Meanwhile, in the current conditions, Andry sees that BI and the government need to continue to maintain liquidity in the domestic market. In terms of foreign exchange liquidity, he emphasized that both parties need to ensure DHE actually comes in. For rupiah liquidity, he hopes there will be an acceleration in government spending in the fourth quarter.
“This government spending will help provide additional liquidity domestically,” said Andry.
3. CIMB Business
CIMB Niaga economist Mika Martumpal said the strengthening of the US dollar could subside at the end of the year. Of note, the Fed’s policy tone changed to ‘less hawkish’ after the FOMC in November. As is known, the market estimates that the Fed will raise its benchmark interest rate again next November to 5.50% – 5.75%.
“If at the November or December meeting, the Fed’s tone changes to a bit less hawkish, then it is possible that the dollar could fall at the end of the year. So in my opinion we are still really waiting for data by data,” he said.
However, Mika believes that the task of the monetary authority, the central bank, will be quite difficult. BI must be able to balance between fairly strong post-Covid economic growth and also stabilizing the rupiah exchange rate amidst rising or high interest rates in developed countries, especially in Europe and the US.
“I think perhaps the option that BI could come up with is to encourage an increase in instruments in the money market or in the money market through monetary operation instruments with a tenor of 2 weeks to 1 year. If we can look at the instruments, including reverse repo and SRBI, that’s what it means. “BI can balance the need for an accommodative monetary policy for the domestic economy with maintaining the BI 7-Day Reverse Repo,” said Mika.
Meanwhile, on the other hand, he sees that higher interest rates in the money market can increase the attractiveness of assets in rupiah or the rupiah exchange rate itself.
4. Danamon Bank
The rupiah exchange rate is indeed collapsing against the United States (US) dollar. However, the Garuda currency is still considered the best performing currency.
According to Bank Danamon Economist Irman Faiz, the Rupiah is considered to still have higher resistance than the currencies of peer countries, due to good fundamental factors.
“We know that we have domestic inflation, much lower than peer countries. In fact, last September, our inflation was much lower than 2.5%,” he explained to CNBC Indonesia.
Then, continued Irman, RI has an attractive real yield on domestic assets and a current account with a minimal deficit. However, Irman reminded us that there are things that need to be watched out for together, namely the weakening of the rupiah which is deeper than the Malaysian ringgit, even though it is better than the Thai baht.
In this case, he hopes that BI will continue to carry out triple intervention and be responsive in issuing new instruments, one of which is SRBI.
5. BJB Bank
Jhon Habibie Barus Treasury & Capital Market Advisor, Bank BJB, assesses that economic indicators in Indonesia, namely controlled inflation and 5% economic growth, are very good. Unfortunately, the weakening of the rupiah cannot be avoided because this comes from external sources.
In this condition, he sees that the first thing that BI and the government must do is maintain economic conditions.
“With good economic conditions. Then policies like those previously conveyed have also been implemented by BI by trying to increase yields on short-term instruments. Such as SRBI which is around 6.4%. That is what is expected to attract the interest of foreign investors,” he said.
Jhon is confident that investors will still come in. Right now, they just wait and see.
“That’s why I think what BI can do is continue to do what it has been doing now and in my opinion its policies are good enough, it just needs to be maintained. And I’m sure that once the Fed level is somewhat neutral, there will be a lot of foreigners entering Indonesia,” stressed Jhon. to CNBC Indonesia.
Watch the video below:
US Labor Data Still Good, Rupiah “Falling”
(haa/haa)
2023-10-05 01:59:08
#Rupiah #Reaches #IDR #Top #Economists #Open #Voices
