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Pediafx.com – Tuesday 29 August 2023

Pediafx – The Indonesian rupiah has strengthened against the US dollar amid the weakening of the US dollar and the release of new instruments by Bank Indonesia.

According to Refinitiv, the rupiah closed 0.2% higher against the US dollar at Rp15,255/US$ on Tuesday (August 29, 2023), although it briefly weakened to Rp15,275/US$ during the trading session.

The rupiah’s strengthening against the US dollar extends the upward trend from yesterday (August 28, 2023) when it also rose by 0.03% to Rp15,285/US$.

The strengthening of the Indonesian rupiah is primarily supported by the weakening US dollar. The dollar index today stands at 104.01, down from yesterday’s position of 104.06. The US dollar weakened as investors adopted a wait-and-see approach, anticipating crucial labor market data to be released this week.

Tonight, market participants will watch the important US Job Openings and Labor Turnover Survey (JOLTS) data, which measures the number of job openings in late July 2023. The market expects the number of new job openings to decline to 9.465 million from 9.58 million in June 2023.

If the number of jobs created is higher, it could dampen expectations of a potential softening stance by the US Federal Reserve (the Fed).

Investors will also closely monitor the release of the US Personal Consumption Expenditures Index on Thursday (August 31, 2023), followed by the release of new non-farm payroll data and the unemployment rate on Friday morning (September 1, 2023).

Ketua The Fed, Jerome Powell, expressed confidence in the sustainability of economic growth in the US, citing “very strong” consumer spending and early signs of recovery in the housing market.

He reiterated The Fed’s commitment to bring inflation back to its 2% target.

“The economy may not be slowing as much as expected. Throughout this year, GDP growth has exceeded expectations and exceeded long-term trends, and recent consumer spending data has been very strong,” Powell said.

Furthermore, last week, the Jackson Hole Symposium was held, attended by Jerome Powell. Powell stated that The Fed is ready to raise interest rates further to cautiously combat inflation if necessary.

According to the latest CME FedWatch tool, 78.5% of market participants predict that The Fed will hold the benchmark interest rate at the September meeting, while 21.5% predict that The Fed will raise interest rates to 5.50-5.75%.

Shifting to domestic news, Bank Indonesia (BI) announced a new investment instrument called the Indonesian Rupiah Securities (SRBI) during the Board of Governors Meeting.

This instrument is a pro-market instrument aimed at deepening the money market, supporting efforts to attract foreign capital inflows in the form of portfolio investments, and optimizing BI’s government bond (SBN) assets as the underlying assets.

Governor of BI, Perry Warjiyo, explained that this instrument is called securities because it is securitization of BI’s SBN holdings.

“BI has more than Rp 1,000 trillion in SBN holdings. We securitize them and issue SRBI with short-term tenors of up to 12 months. We will issue the 6, 9, and 12-month tenors,” Perry said during the Board of Governors Meeting on Thursday (August 24, 2023).

This has caught the attention of Andry Asmoro, Chief Economist at PT Bank Mandiri Tbk, who believes that SRBI will have a positive impact on the financial market, particularly in maintaining rupiah stability. Previously, Andry predicted that the US dollar could be below Rp15,000 until 2024.

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