The rupiah weakened during trade on Monday morning by five points to Rp 13,163 per US dollar from Rp 13,158.

'€œThe rupiah weakened while the majority of currencies in Asia strengthened against the dollar. It seems that negative internal sentiment is stopping the rupiah from moving into positive territory,'€ Samuel Sekuritas economist Rangga Cipta said as quoted by Antara in Jakarta on Monday.

He said Bank Indonesia'€™s (BI) forecast that inflation would remain high in May could be one reason the rupiah had depreciated again.

Rangga said that financial markets also remained concerned by a statement by US Federal Reserve (Fed) chair Janet Yellen that the Fed would increase its rate this year.

'€œYellen said in her speech that a Fed rate hike would still occur this year if the US'€™ economic condition continued to improve,'€ he said.

Bank Himpunan Saudara financial market analyst Rully Nova said that although the Fed had not announced exactly when it would increase its rate, the possibility would continue to dog the rupiah. As long as there is no certainty from the Fed as to when the rate hike would occur, the rupiah was likely to continue to depreciate, he said.

Psychologically, the analyst said, such an uncertain sentiment would lead financial market players to accumulate foreign currencies deemed effective to safeguard asset value. In this regard, the US dollar is most popular among investors.

However, Rully said, it was hoped the government'€™s recent measure to issue US$2 billion worth of international Islamic debt papers, or sukuk, could strengthen Indonesia'€™s fiscal standing. A strong fiscal standing could guard the domestic economy from negative sentiment, said the analyst. (ebf)

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