The rupiah was still unable to rise against the United States (US) dollar in Thursday's trading. As a result, the rupiah has not strengthened for 9 days, the details are 7 times weakened and 2 times stagnant.
According to Refinitiv knowledge, the Indonesian monetary unit opened commerce stagnant however shortly entered the red zone. Rupiah depreciation reached 0.28% at Rp 14,380/US$, the weakest since last November 5.
The sentiment of market participants remains mixed thanks to the unfold of the coronavirus variant letter, the Centers for illness management and interference (CDC) declared that it found the primary case of letter within the US.
Now it is feared that Omicron will spread quickly, especially in South Africa, cases of the disease caused by the coronavirus (Covid-19) are now dominated by the Omicron variant, only 4 weeks after the first case was discovered.
In addition, it is also feared that Omicron will spread to other countries, triggering a global economic slowdown. Supply chain problems that trigger high inflation are also predicted to worsen.
The Existence of Tapering Affects the Rupiah
Supply chain issues remain highly vulnerable, the Omicron variant underscoring if the crisis is still not over, said Sian Fenner, chief Asia economist at Oxford Economics in a note cited by CNBC International.
Under these conditions, the US dollar, which has a haven status, benefits more than the rupiah. In addition, the rupiah was also under pressure due to the possibility of the US central bank (The Fed) accelerating the normalization of monetary policy.
The Fed has officially announced that it will taper or reduce the value of the QE asset purchase program by the US $ 15 billion every month starting last November. With a QE price of US$ a hundred and twenty billion, it took eight months to finish.
This means that the tapering can finish in Gregorian calendar month next year. However, in recent weeks, many elite Fed officials have pushed for faster tapering to curb high inflation. And Fed Chair Jerome Powell this week said it could accelerate the pace of tapering.
Now the economy is very strong, and inflation is also very high, therefore in my view, it would be appropriate to consider completing the tapering sooner, maybe a few months earlier.
Powell also said he would discuss accelerated tapering this month. The Fed will hold a monetary policy meeting on December 14 and 15 local time. If it is true that the tapering is accelerated, there is a risk that the rupiah will be depressed.
Spot Market Response to Tapering
Especially if the tapering acceleration is followed by an earlier increase in interest rates than previously predicted in semester II-2022.
The market is still calm in responding to the tapering, there is no turmoil in the financial market as in 2013, which is called a taper tantrum. The reason is that Powell has indicated that he will conduct tapering since the beginning of this year so that the market is more prepared.
Moreover, once tapering accelerates, there's an opportunity that the Fed will raise interest rates earlier. Several elite Fed officers in recent weeks have pushed tons to accelerate the pace of tapering. However, Powell is not expected to be that hawkish.
Meanwhile from at intervals the country, there's some excellent news. The Central Statistics Agency (BPS) nowadays according to Indonesia's inflation figures for the November 2021 amount. The results weren't aloof from market expectations.
Head of BPS Margo Yuwono revealed that inflation was 0.37% in November 2021 compared to the previous month (month-to-month/MtM). Compared to November 2020 (year-on-year/YoY), the inflation rate was 1.75%.
Core inflation contains a bunch of products and services whose costs square measure troublesome to fluctuate and square measure persistent. An increase in core inflation can be a sign of rising public buying power.
