The rupiah exchange rate was sluggish against the US dollar this week. Even though there are many positive sentiments from within the country. According to Refinitiv data, the rupiah exchange rate weakened slightly by 0.01% this week and closed at Rp 14,235/US$ in the spot market.
The Central Statistics Agency (BPS) reported that Indonesia's exports in October 2021 reached US$ 22.03 billion, up 53.35% YoY and 6.89% compared to the previous month. This realization also brought Indonesia's exports to reach the highest record in history.
With the value of exports and imports, Indonesia's trade balance surplus in October was US$ 5.74 billion. The surplus is at an all-time high, surpassing the previous record of US$4.74 billion recorded in August.
After that, the rupiah weakened and tended to weaken, although it briefly trimmed its weakness on Thursday when it closed at Rp 14,225/US$. This is in line with the policy of Bank Indonesia (BI) to maintain its benchmark interest rate at 3.5% for the ninth time this year.
There is Inflation That Causes the Rupiah to Weak
One of the main sentiments for the rupiah this week is about foreign investors leaving the Indonesian bond market. Based on data from the Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance, there was a capital outflow from the bond market of Rp 23 trillion in the period November 1-11.
The exit of foreign investors from the bond market followed the increase in US bond yields (treasury), in response to the Fed's tapering and expectations of an increase in interest rates.
The market sees, high inflation will make the Fed will raise interest rates next year. Based on the CME Group's FedWatch tool, the market now sees a probability that the Fed will raise interest rates three times in the next year.
Bank Indonesia (BI) reported that Indonesia's Balance of Payments (BOP) posted a surplus of US$ 10.7 billion in the third quarter of 2021. Much better than the previous quarter, which had a deficit of US$ 0.4 billion.
The balance of payments performance was supported by the current account which recorded a surplus, reversing from the previous quarter which recorded a deficit, as well as an increasing surplus in the capital and financial account, said BI's written statement on Friday.
The current account in the third quarter of 2021 recorded a surplus of US$ 4.5 billion or 1.5 percent of Gross Domestic Product (GDP). This value also improved compared to the previous quarter which was minus US$ 2 billion (0.7% of GDP).
Rupiah Movement Slightly Corrected
The current account performance was mainly contributed by the increasing surplus in the goods balance, supported by an increase in non-oil and gas exports in line with strong demand from trading partner countries and the continued increase in prices of key export commodities in the international market.
The surplus in the third quarter of 2021 was the highest since the fourth quarter of 2009. The current account is a crucial factor in dictating the rate of the rupiah because foreign exchange flows from this account tend to be more stable.
The rupiah exchange rate ended this week's trading with a slight weakening. It was noted that the spot rupiah exchange rate closed at Rp. 14,232 per US dollar. The spot rupiah weakened 0.08% on the day and weakened 0.09% on the week.
A slight correction also occurred in the Jisdor reference rate. Garuda's currency closed 0.04% to Rp 14,237 per US dollar. Meanwhile, in the past week, Jisdor's rupiah strengthened slightly by 0.04%.
Similarly, Global Kapital Investama analyst Alwi Assegaf also highlighted that sentiment for next week may be influenced by external factors. Concerns about inflation are still an issue that could exacerbate sentiment for the rupiah.
