Indonesian Rupiah Hovering Near 17-Year Low on Thursday
As the Indonesian rupiah continued to depreciate on Thursday (04/06), touching a 17-year low, a central bank official tried to ease concerns by stating that Bank Indonesia is always in the foreign exchange and bond markets to monitor movements and ease volatility. On Thursday morning the bond yield, which has been rising since Friday (29/05), was 8.198 percent. Based on the Bloomberg Dollar Index, Indonesia's rupiah had depreciated 0.11 percent to IDR 13,245 by 11:10 am local Jakarta time.
The rupiah is also negatively affected as market participants speculate that US May Nonfarm Payrolls, to be released on Friday, have improved. Yesterday (03/06), US ADP Nonfarm Employment rose by 201,000 in May, slightly higher-than-expected and causing positive sentiments regarding the US economy. However, other US data are not as positive. For example, the May ISM Non-Manufacturing PMI fell to 55.7 from 57.8 in the preceding month.
However, the rupiah may be supported by the strengthening euro. After the Eurozone’s May inflation was better-than-expected at 0.3 percent (y/y) this quicker-than-expected spike (despite being way below the two percent middle-to-long term ECB target) made some investors speculate that the ECB may cut short its bond-buying program before September 2016. As a result the euro has appreciated against the US dollar and this should also provide some support for the rupiah (and other emerging currencies).
However, uncertainties remain due to the Greek debt crisis. On Friday, Greece is required to make a debt repayment to the IMF. However, it still needs to clinch a deal with its Eurozone creditors to obtain bailout funds and avert an exit from the Eurozone.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.35 percent to IDR 13,243 per US dollar on Thursday (04/06).
Indonesian Rupiah versus US Dollar (JISDOR):
| Source: Bank IndonesiaThere is few domestic data that can support the rupiah apart from some optimism that Indonesia’s economic growth will accelerate in the second quarter of 2015. Most investors, however, are still ‘not amused’ after seeing Indonesia’s May inflation accelerating beyond expectation. The country’s consumer price index rose to 7.15 percent (y/y) in May, from 6.79 percent (y/y) in the preceding month, primarily on higher transportation and food prices. This implies that the central bank is expected to maintain the current high interest rate environment.