The Indonesian rupiah is appreciating against the US dollar on Monday (06/02). Based on the Bloomberg Dollar Index, the rupiah had appreciated 0.13 percent to IDR 13,325 per US dollar by 12:15 pm local Jakarta time. It is assumed that optimism about Indonesia's improving economic fundamentals in combination with rebounding commodity prices and slower-than-expected US economic growth supports the currency of Indonesia. Meanwhile, other Asian emerging market currencies are also appreciating against the greenback.
Fourth quarter economic growth in the USA, the world's top economy, was not in line with analysts' estimations. US gross domestic product (GDP) rose by an annual 1.9 percent (y/y) in Q4-2016 (versus a 2.2 percent y/y estimate). Although US consumer spending remained steady while business investment grew, a plunge in shipments of soybeans weighed on US exports in the last quarter of 2016. This weaker-than-estimated US growth could make the Federal Reserve hesitant to tighten its monetary policy too early, implying that emerging markets, including Indonesia, become more attractive for the short-term due to their higher yields.
Even upbeat US non-farm payroll data on Friday (03/02) did not lead to a rapidly strengthening US dollar. The US Department of Labor said non-farm payrolls rose to a seasonally adjusted 227,000 in January 2017, from 157,000 in the preceding month. In fact, a smaller-than-expected rise in US wages in January 2017 put more pressure on the US dollar.
Meanwhile, the oil price is edging up on concern that new US sanctions against Iran (concerning the Iranian ballistic missile test) could be extended to affect the nation's crude oil supplies. A rising oil price usually boosts other commodity prices. For Indonesia, a key commodity exporter this would be a positive matter. Bloomberg reported that the oil price is now at the highest point since the summer of 2015.
Earlier today, Indonesia's Statistics Agency (BPS) announced that Indonesia's economy expanded by 5.02 percent (y/y) in 2016, slightly below analysts' estimates. However, this performance did not cause a significant impact on the performance of Indonesia's rupiah or Indonesia's benchmark Jakarta Composite Index.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.25 percent to IDR 13,329 per US dollar on Monday (06/02).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia