Rupiah News - The USD/IDR exchange rate continues to rise, approaching 15,325 as the European session begins today. Increased demand for the US dollar is driven by anticipation that the Fed will continue its tightening cycle. Market participants are awaiting Bank Indonesia's interest rate decision on Thursday and Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole Symposium on Friday for new insights.

However, it is expected that Indonesia's central bank will maintain its benchmark interest rate at 5.75% for the seventh consecutive meeting on Thursday, as indicated by a Reuters poll conducted between August 14 and 21.

Furthermore, the weakening of the Rupiah is exacerbated by rising US Treasury bond yields and the stronger USD. The yield on 10-year US Treasury bonds has reached 4.344%, up from a peak of 3.366% in 2007. Meanwhile, the yield on 10-year government bonds surged to 6.725%, reaching its highest level since April.

Additionally, the mild impact of the People’s Bank of China (PBoC) cutting interest rates on Monday also puts pressure on the Rupiah. Authorities in China have reduced the one-year Loan Prime Rate (LPR) by 10 basis points (bps) to 3.45%, from 3.55%, while the five-year LPR remains stable at 4.2%.

Uncertainty in the Chinese economy adds further strain on Indonesia's growth. Nevertheless, on Sunday, authorities in China reported their intention to provide financial support to alleviate concerns regarding local government debt, according to Reuters. This action may ultimately help limit the decline of the Rupiah and act as a constraint on USD/IDR movements.

From the US dollar perspective, investors are raising expectations for a potential interest rate hike by the Federal Reserve (Fed), despite strong employment data and low inflation figures from last week.

The speech by Fed Chairman Jerome Powell on Friday is expected to guide investors and potentially provide insight into the economic situation. If the tone leans towards a tighter stance, it could influence the strengthening of the US dollar against its competitors.

Looking ahead, market participants will closely monitor the monetary policy decisions from Bank Indonesia (BI) announced on Thursday. Additionally, the upcoming speech by Fed Chairman Jerome Powell at the Jackson Hole Symposium on Friday will be a key focus this week. Traders will use information from this speech to gain insights and seek opportunities in the USD/IDR market.

Warning!

This analysis is based on fundamental and technical perspectives from reliable sources and is not financial advice or a recommendation. Remember, this content aims to enrich readers' knowledge. Always conduct your own research on forex information before using it as a basis for your trading decisions.

Stay updated on the latest news and articles from GIC Indonesia by checking Google News daily for updates in the forex and crypto markets. Trade on GICTrade using an ECN account to enjoy trading with low spreads starting from zero!

Also Read: