International Sentiment Continues to Put Pressure, Rupiah Weakens Again

Indonesia's Foreign Debt

Indonesia’s currency, Rupiah, in the past week experienced ups and downs in prices. After briefly strengthening on Wednesday (26/1), the Rupiah continued to weaken against the US Dollar. Today, Monday (31/1), the Rupiah has entered the red zone at the start of trading.

Based on data from Refinitiv, the Rupiah opened trading with a slight decline of 0.03% to Rp 14,390/US$ and remained at that level until 9:13 WIB.

This figure weakened 25.5 points or 0.18 percent from the previous trade, which was Rp. 14,374 per US dollar.

Over the past week, the Rupiah weakened 0.35% against the United States (US) dollar to Rp. 14,385/US$. In 5 trading days, the Rupiah has never strengthened once, the details have weakened 3 times and stagnated 2 times.

Money Market Analyst Ariston Tjendra said that the rupiah weakened today. This was due to the market’s cautious attitude towards the Fed’s latest policies which could give negative sentiment to the rupiah.

Ariston said, “The market’s anticipation of the Fed’s series of monetary policies starting in March is still the driving force behind the strengthening of the US dollar against other exchange rates, including the rupiah.”

International Sentiment Affects Rupiah

Even though this figure continues to weaken, the rupiah’s movement is quite good when compared to the very strong US dollar after the Fed (US central bank) confirmed that it would aggressively normalize its monetary policy this year.

Inflation based on personal consumption expenditure (PCE) in the United States which is getting higher strengthens the possibility that the Fed will be aggressive in 2022. On Friday last week, core PCE inflation was reported to have grown 4.9% year-on-year (YoY) in December, which was the highest level since September 1983.

The release further strengthened the position of the US dollar, the index during last week rose 1.7% to 97.270 which was the highest level since June 2020.

Another sentiment also came from China. Manufacturing activity slowed in January.

Based on data from the Chinese government, manufacturing activity as seen from the purchasing manager index (PMI) was at the level of 50.1, down from 50.3 in December 2021.

The PMI uses 50 as the threshold, below it means contraction, above it means expansion. Other PMI data released by Markit/Caixin even showed a contraction at 49.1 from 50.9 previously.

The data released by the Chinese government gives concern that the Chinese economy will slow down. This of course has an impact on the rupiah.

Domestic sentiment

Meanwhile, the main sentiment coming from abroad came from the Covid-19 pandemic and the Omicron variant. Seeing that the situation is still deteriorating, the market is more cautious and waiting to see if the government will impose a level 3 or 2 Community Activity Restriction (PPKM) in DKI Jakarta.

Based on data from the Covid-19 Task Force yesterday, there were an additional 12,422 cases, the highest since 27 August.
DKI Jakarta still dominates the additional daily confirmed cases of the total with a total of 6,613. This causes market participants to worry whether PPKM in DKI Jakarta will be tightened or not.