Wednesday, 22 May 2019 | 05:31 WIB

Rupiah Exchange Rate Depreciates on Speculations of The Fed Monetary Policy Direction

Illustration: Rupiah banknotes

JAKARTA, NETRALNEWS.COM - The rupiah exchange rate traded interbank in Jakarta on Tuesday (9/26/2017) afternoon, dropped by 46 points to IDR13,370 compared to IDR13,324 per US dollar.

Monex Investindo Futures analyst Agus Chandra in Jakarta, Tuesday said that the anticipation of investors to the Fed Governor Janet Yellen's speech on the direction of its monetary policy makes developing country currencies, including rupiah depreciated.

"The focus of investors is on Janet Yellen's speech, looking for clues as to whether the central bank will raise interest rates this year, the condition that keeps currencies in developing countries stalled," he said.

He noted that Fed executive William Dudley said the central bank should maintain a policy tightening strategy gradually, while other Fed executive, Charles Evans urged caution to impose tight monetary policy.

On the other hand, he continued, the ongoing conflict in the territory of the Korean peninsula also helped limit the demand for assets in developing countries. The condition encourages the flow of funds towards safe-haven assets.

ForexTime Research Analyst Lukman Otunuga added that currencies in emerging economies are quite sensitive to expectations of a Fed Fund Rate hike so movement is likely to be contained.

"Speculation on US interest rate hikes in December this year strengthened the US dollar so that the developing market currency including rupiah weakened," he said.

Meanwhile, the median rate of Bank Indonesia (BI) on Tuesday recorded the rupiah exchange rate weakened to IDR13,348 position compared to the previous position of IDR13,305 per dollar.