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Rupiah holds firm hours before election
The Indonesian currency has strengthened in February and hit a monthly high on the eve of the presidential election.
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All about money: A teller shows her customer rupiah banknotes on Oct. 30, 2023, at a Bank BSI branch in Jakarta. (Antara/Muhammad Adimaja)
The rupiah has strengthened since the beginning of February and hit a monthly high on the eve of the presidential election.
Indonesia’s currency changed hands at Rp 15,803 per dollar on the last day of January, as per the daily fixing of Bank Indonesia (BI), and has been on a broadly rising trend since.
With a BI reference rate of Rp 15,585 on Tuesday, it hit the highest value so far this month just before the election.
BCA chief economist David Sumual told The Jakarta Post on Tuesday that even ahead of the election, the rupiah was mainly driven by “external factors”, which suggests there is no overriding concern in financial markets stemming from domestic developments.
He noted that Indonesia’s general election coincided with the release of macroeconomic data on employment and inflation in the United States and added that those were the main two indicators watched by the US central bank for guidance on setting the federal funds rate (FFR).
A lower FFR would reduce yields on US dollar-denominated assets and thereby generally encourage investors to shift more of their money out of the US to more risky but potentially more profitable investments abroad, for instance to emerging markets such as Indonesia, buoying the exchange rates of currencies like the rupiah in the process.
The Federal Reserve (Fed) lifted the FFR to a high point of 5.25 to 5.5 percent in July last year and has kept it there ever since, but it has signaled at rate cuts to take place in 2024, which could happen if employment and inflation figures are low.
