Indonesian Rupiah Exchange Rate Update: Appreciating on Weak US Data
Based on the Bloomberg Dollar Index, the Indonesian rupiah exchange rate appreciated 0.23 percent to IDR 11,603 per US dollar on Thursday (24/04). The currency's performance was particularly influenced by weak new US single-family homes sales. These sales fell more than expected and hit a five-month low in February 2014, implying that there is continued weakness in the US housing market. Meanwhile, US durable goods orders and US initial jobless claims, which will be released later today, are expected to be weak too.
These US data are expected to provide positive sentiments for the rupiah on the short term.
Previously, the rupiah depreciated to the IDR 11,600 per US dollar boundary due to increased US dollar demand from local foreign-owned companies. Indonesia's Finance Minister Chatib Basri said that towards the middle of the year, local US dollar demand usually rises for reasons of profit repatriation, imports and debt repayments. Other Asian emerging currencies, such as Malaysia's ringgit and India's rupee, experience the same trend.
Therefore, the recent depreciation rupiah is attributed to seasonal factors only, not to the country's economic fundamentals. The central bank said that it would not need to intervene to stabilize the currency's value (as there are no signs of speculative acts).
However, analysts also pointed at continued political uncertainty after the fragmented outcome of Indonesia's 2014 legislative elections as well as renewed concerns about the possible widening of the country's current account deficit in the first quarter of 2014. Both these issues can cause a declining rupiah.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.15 percent to IDR 11,608 per US dollar on Thursday (24/04).
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