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JCI, rupiah plummet as Fed rate concern emerges
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Signs of panic: A view of the trading floor at the Indonesia Stock Exchange (IDX). The Jakarta Composite Index (JCI) and rupiah's value against the US dollar plunged on Friday morning following the market's concern over a faster-than-expected hike in the US Federal Reserve's funds rate. (JP/Wienda Parwitasari)
T
he Jakarta Composite Index (JCI) and rupiah's value against the US dollar plunged on Friday morning following the market's concern over faster-than-expected hike in the US Federal Reserve's funds rate.
The rupiah depreciated by 3.86 percent and stood at Rp 13,645 per dollar as of 9:29 a.m., a level unseen since June.
The JCI, the Indonesia Stock Exchange (IDX) benchmark, meanwhile, plummeted by 1.28 percent at the beginning of trading on Friday to 5,380 points. It further weakened by more than 3 percent before it rebounded to 5,318 as of 9:28 a.m.
Markets were speculating that the Fed could soon raise interest rates to tame the anticipated rise of inflation following a plan from US president-elect Donald Trump to pick up government spending, Daewoo Securities Indonesia research head Taye Shim wrote in a text message.
"Given the secular trend of FX rate hinges on GDP growth and interest rate direction of the two countries, higher government spending from the US should improve growth outlook while faster-than-expected rate hike by the Fed should drive the value of the greenback," he wrote.
"The question is whether President-elect Trump will be able to spend with lower revenue forecast, as a quick reminder, he was campaigning that he wants tax cuts," he concluded. (hwa)
