Investors Cautiously Hold Rupiah Due to Widespread Indonesian Trade Deficit
JurnalFakta. Investor interest in emerging market currencies, including Indonesia, slumped in trading this week. The reason is that the market is increasingly worried about slowing global economic growth. "Concerns about various geopolitical risk factors triggered buying sentiment towards the Dollar which increasingly hit the emerging market currencies," said Lukman Otunuga, FXTM Research Analyst on Tuesday (12/18/2018).
Lukman explained, the rupiah had difficulty surviving against the US dollar due to cautious sentiment and more Indonesian economic data, adding to the pressure on this currency.
The Central Bureau of Statistics (BPS) in its latest report said Indonesia recorded the widest trade deficit for more than the last five years in November 2018 due to a decline in exports.
The trade deficit reached $ 2.05 billion, so the Rupiah threatened to close in 2018 was not encouraging.
Although the Fed is expected to increase interest rates this week, Bank Indonesia is unlikely to take steps - especially given that BI has raised interest rates six times since May.
The US dollar benefited from safe haven flows and expectations of a rate hike in December, so that the Rupiah and many other emerging market currencies remain threatened with weakness.
From the technical aspect, the dollar exchange rate against the rupiah was around Rp. 14600 when this report was written. A stronger dollar can deliver this currency even higher, namely towards Rp. 14660 in the short term.
"This week is the last interesting week of the year with various risky events including the release of important economic data and various monetary policy decisions," Lukman Otunuga said.
This week's Federal Reserve meeting will be closely monitored by investors. The last rate increase in 2018 will almost certainly occur, but more important is how the Fed's dot plot moves in 2019 and beyond.
If US monetary policy makers see a big risk of an economic slowdown, the points on the dot plot should decrease. The statement must be more balanced between a little optimism and the willingness to react quickly, if the recession fears really occur.
Board Chair of Fed Governor Jerome Powell is likely to face many questions about the threat of a slowdown in the US economy, notably reviewing the recent inversion of yield curves. Investors must read what is implied to understand the Fed's current position.
The Bank of England and the Bank of Japan will also hold meetings this week, but the two don't seem to be attractive. Brexit is a major topic in the UK and the BoE cannot take new policies before the political situation is clearer.
Meanwhile, Japanese monetary policy seems to be far from tightening due to the recent contraction in the Japanese economy.
Regarding the data release, the inflation figures of the European Union, Britain, Canada and the US will be announced. US Final GDP data will also be released this week, including other data such as ordering durable goods, available home sales, building new houses, and building permits.
"The increasingly weak US housing sector could add to concerns about the economic slowdown in the coming year,"
Lukman explained, the rupiah had difficulty surviving against the US dollar due to cautious sentiment and more Indonesian economic data, adding to the pressure on this currency.
The Central Bureau of Statistics (BPS) in its latest report said Indonesia recorded the widest trade deficit for more than the last five years in November 2018 due to a decline in exports.
The trade deficit reached $ 2.05 billion, so the Rupiah threatened to close in 2018 was not encouraging.
Although the Fed is expected to increase interest rates this week, Bank Indonesia is unlikely to take steps - especially given that BI has raised interest rates six times since May.
The US dollar benefited from safe haven flows and expectations of a rate hike in December, so that the Rupiah and many other emerging market currencies remain threatened with weakness.
From the technical aspect, the dollar exchange rate against the rupiah was around Rp. 14600 when this report was written. A stronger dollar can deliver this currency even higher, namely towards Rp. 14660 in the short term.
"This week is the last interesting week of the year with various risky events including the release of important economic data and various monetary policy decisions," Lukman Otunuga said.
This week's Federal Reserve meeting will be closely monitored by investors. The last rate increase in 2018 will almost certainly occur, but more important is how the Fed's dot plot moves in 2019 and beyond.
If US monetary policy makers see a big risk of an economic slowdown, the points on the dot plot should decrease. The statement must be more balanced between a little optimism and the willingness to react quickly, if the recession fears really occur.
Board Chair of Fed Governor Jerome Powell is likely to face many questions about the threat of a slowdown in the US economy, notably reviewing the recent inversion of yield curves. Investors must read what is implied to understand the Fed's current position.
The Bank of England and the Bank of Japan will also hold meetings this week, but the two don't seem to be attractive. Brexit is a major topic in the UK and the BoE cannot take new policies before the political situation is clearer.
Meanwhile, Japanese monetary policy seems to be far from tightening due to the recent contraction in the Japanese economy.
Regarding the data release, the inflation figures of the European Union, Britain, Canada and the US will be announced. US Final GDP data will also be released this week, including other data such as ordering durable goods, available home sales, building new houses, and building permits.
"The increasingly weak US housing sector could add to concerns about the economic slowdown in the coming year,"
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