The super dollar overshadows rupiah

JAKARTA. The phenomenon of super dollar has come back, as the US dollar exchange rate is getting stronger against major world currencies, including the rupiah.

On Monday (21/11) rupiah spot rate was closed at RP 13,406 per US dollar. However, during the mid-day, rupiah was up to the level of RP 13,461 per US dollar.

The three months rupiah’s non-deliverable forward (NDF) exchange rate also reflects that the rupiah remains unstable.The three months rupiah’s NDF exchange rate reached Rp 13,793 per US dollar, while the 12 months NDF exchange rate ached Rp 14,533 per US dollar. On Friday two weeks ago, the rupiah exchange rate once hit Rp 13,873 per US dollar.

Some financial institutions also predicted that the stronger the US dollar might have continued until 2017. In a note for investors last week, Goldman Sachs signaled that the US dollar is likely to strengthen by 10% against major world currencies over the next year. In other words, the strengthening of the US dollar is equivalent to the pressure over rupiah.

Recently, a research team led by Standard Chartered Bank Head of Asian FX Strategy Robert Minikin also lowered the weighting of rupiah from overweight to neutral. Standard Chartered also lowered the prediction on rupiah in the third quarter of 2017 to Rp 14,200 per US dollar, from the previous level of Rp 12,800, on the grounds that the rupiah was depresed by the amount of foreign funds in the country.

Some issuers, which have high exposure on the US dollar have set strategies in facing the potential of a stronger the US dollar, such as PT Sri Rejeki Isman Tbk (SRIL).

President Director of Sri Rejeki Iwan Lukminto said that SRIL is an exporter. Therefore, “The stronger the US dollar has benefited us,” said Iwan, Sunday (20/11).

However, SRIL continues to conduct natural hedging to anticipate the fluctuated exchange rate. Let alone, SRIL is less affected by the fluctuated rupiah, as the company booked the financial report in the US dollar currency.

Meanwhile, PT Indosat Tbk (ISAT) is hedging for foreign exchange transactions, particularly for debts. The debts of ISAT in the form of the US dollar have decreased by 12% in the third quarter, compared with 30% in the three years ago. "There is protection, but the value is not as high as the three years ago," said Managing Director of ISAT Alexander Rusli, Monday (21/11).

Even so, analysts at Asjaya Indosurya William Suryawijaya said that the issuers need to create a strategy to protect the performance in the next year, when the US dollar actually strengthened. "In the next year, the stronger dollar, the more possibility of hedging will be," Williams said.

William predicted that rupiah will stand at the ranges of Rp 13,100-Rp 13,550 per the US dollar. The estimation has included the sentiments of the increase in The Fed’s interest rate. “I am still optimistic that The Fed will not raise the interest rate, due to the presidential transition, William said.

Analyst at the Association of Indonesia Securities Analysts (AAEI) Reza Priyambada predicted that the rupiah could rebound to the level of Rp 12,950-Rp 13,350 per US dollar.

Meanwhile, Head of Research and Strategic Policy of Bahana Securities estimated that rupiah will be closed at Rp 13,200 per US dollar at the end of the year. This is much lower than the previous estimation, which stood at the level of Rp 12,800 per US dollar.

(Muhammad Farid/ Translator)