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Rupiah kicks off new year by recouping losses, pointing to further gains
The rupiah climbed to its six-month high and broke below the 14,000 mark against the US dollar on Monday
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An employee arranges rupiah and US dollar banknotes at an office of Bank Syariah Mandiri in Jakarta on April 20, 2020. (Antara/Nova Wahyudi)
T
he rupiah exchange rate began the new year by recouping its losses, and analysts expect the currency to further gain going forward amid risks surrounding Indonesia’s vaccination efforts and economic recovery.
The rupiah climbed to its six-month high and broke below the 14,000 mark against the US dollar on Monday, appreciating by 1.1 percent on the day before depreciating 0.15 percent on Tuesday to 13,916. The currency strengthened 0.14 percent on Wednesday to 13,895 against the greenback.
The recent gain was supported by fading US election risks and coronavirus vaccine developments, according to several analysts.
“The rupiah’s short-term outlook is positive and likely to gain further on the back of higher demand for riskier assets, vaccine developments and the United States’ approved fiscal stimulus,” Bank Permata economist Josua Pardede said on Tuesday. “We expect more inflows into the country’s bond markets as a result of the government’s front-loading strategy, which will support the currency.”
The currency’s rally erased most of its losses last year, though it is still Asia’s second-worst performer of 2020, after falling 18 percent in March and April last year as the coronavirus fears sent shockwaves across financial markets.
Although the rupiah remains attractive as it offers higher yields compared to peer countries, the currency’s outlook over the next six to 12 months would depend on the progress of the vaccination program and whether the global economic recovery continues, Josua went on to say.
“If economic recovery and the efforts to create herd immunity takes longer than previously anticipated, that will make a strong case for the rupiah’s weakening,” he added.
