Rupiah Gains Strength Against the US Dollar Amid Economic Slowdown and Debt Issues

Rupiah and US Dollar

The Indonesian Rupiah has strengthened against the US Dollar in early Thursday (27/4/2023) trading. The US Dollar’s weakness due to signs of economic slowdown and debt problems allowed the Rupiah to continue to strengthen.

According to Refinitiv data, the Rupiah opened at Rp 14,820/US$, up 0.07% in the spot market. The strength increased to 0.34% to Rp 14,780/US$ at 9:08 am WIB.

The US Dollar index fell 0.4% in Wednesday trading. The index, which measures the strength of the US Dollar, fell after the Department of Commerce reported that orders for capital goods fell more than expected in March, as did shipments. This indicates a slowing US economy.

Market participants are currently awaiting the release of Q1 2023 US economic growth data, which will be released tonight. Several polls show that the US economy will slow down or even contract in January-March 2023.

Analysts estimate that the US economy has already been heavily affected by very tight monetary policy.

In addition, debt ceiling issues also burden the US Dollar. The United States is once again threatened with default on its debt in the near future. This was revealed by US Treasury Secretary Janet Yellen, who has even warned about it since last year.

US debt reached $31 trillion or around Rp 460 quadrillion (exchange rate Rp 14,900/US$) for the first time in history in October last year.

Data from the Treasury Department showed that as of March 31, US debt had reached $31.45 trillion, making it the world’s largest.

“Our debt default will result in an economic and financial disaster,” Yellen told members of the Sacramento Metropolitan Chamber of Commerce on Tuesday (25/4/2023).

“Failure will raise borrowing costs forever. Future investments will be much more expensive,” she said, quoted by Reuters.

The weakening of the US Dollar is mainly due to the concerns about the US economy’s future growth and its high level of debt. These issues could have a significant impact on the global economy, especially in emerging markets such as Indonesia.

However, the Rupiah’s strength is also partly due to Indonesia’s relatively stable economic growth and government policies aimed at boosting economic activity. The government has been implementing various programs to support economic recovery, such as tax incentives for businesses and increased spending on infrastructure projects.

Overall, the global economic situation remains uncertain, and market participants will continue to closely monitor developments in the US and other major economies.