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FOREX - JAKARTA. The Indonesian rupiah took a significant hit in today's trading, Wednesday (5/6). The currency's depreciation could deepen on Thursday (6/6) if U.S. employment data continues to show strength.
On Wednesday (5/6), the spot rupiah rate weakened by 0.41% to IDR16,287 per U.S. dollar. Meanwhile, the Jisdor rupiah rate weakened by 0.38% to IDR 16,282 per U.S. dollar.
Research & Education Coordinator at Valbury Asia Futures, Nanang Wahyudin, stated that the rupiah nearly breached IDR16,300 on the third day of this week, Wednesday (5/6). This depreciation marks a low point for the rupiah, as it is the weakest it has been since April 2020, or in the last four years.
Read Also: Spot Rupiah Closed Weakened by 0.17% to Rp 15,719 per US Dollar on Thursday (29/2)
Not only the currency movement, the stock market also plummeted by more than 2%. In the bond market, the yield of 10-year government bonds rose by 1.7 basis points (bps). The rise in yield indicates a drop in bond prices.
"The cause is largely due to the influence of foreign capital outflows," Nanang told Kontan.co.id, Wednesday (5/6).
Nanang added that concerns about widening fiscal deficits to accommodate programs from the elected presidential pair add to domestic worries. The government estimates next year's budget deficit could reach 2.82% of GDP, larger than this year's estimated 2.29%.
Another factor triggering the rupiah's depreciation is uncertainty about the direction of Federal Reserve policy, which is currently under global scrutiny amid threats of economic slowdown. The U.S. central bank is expected to maintain existing interest rates while awaiting the release of the latest employment and CPI inflation data.
Read Also: Spot Rupiah Strengthens 0.32% to Rp 15,655 per US Dollar on Thursday (7/3)
Nanang explained that if inflation and employment data significantly slow down, there is a possibility of an accelerated interest rate cut. However, investors currently prefer to hold dollars because they are focused on nonfarm payroll (NFP) data released on Friday (7/6).
Chief Economist of Bank Permata, Josua Pardede, observed that today's rupiah depreciation is related to anticipation ahead of the release of Indonesia's foreign exchange reserves data on Friday (7/6). Externally, the rupiah's depreciation is influenced by investors waiting for the European Central Bank (ECB) announcement tomorrow.
The rupiah's depreciation is also supported by demand for the U.S. dollar in the domestic market. However, Josua sees the potential for the rupiah to strengthen in tomorrow's trading, Thursday (6/6). This projection is due to the potential decrease in U.S. employment data, namely the ADP Employment Change.
Read Also: Spot Rupiah Closes Weaker at Rp 16,265 Per US Dollar on Thursday (30/5)
"The decrease in ADP data will impact the increase in expectations for a decrease in the Fed Funds Rate (FFR) in 2024," Josua told Kontan.co.id, Wednesday (5/6).
Nanang stated that the rupiah's movement tomorrow will be influenced by how the dollar moves in the Asian session, after tonight's release of ADP Employment and ISM Service PMI data. If this data improves again, the rupiah could breach and move above IDR 16,300 per U.S. dollar tomorrow. Conversely, disappointing data could trigger profit-taking for the rupiah to return below IDR16,200 per U.S. dollar.
"The weakening rupiah movement is under the scrutiny of BI and the Government authorities, if the depreciation goes too far, there is a possibility of intervention," added Nanang.
Nanang predicts the rupiah will move in the range of IDR16,150 per U.S. dollar to IDR 16,350 per U.S. dollar in Thursday's (6/6) trading. Meanwhile, Josua predicts the rupiah will move in the range of IDR 16,225 per U.S. dollar to IDR 16,325 per U.S. dollar.
