Rupiah is predicted to return to turbulence in the trading session tomorrow, Monday (8/10/2018) in the range of Rp. 15,110-15,240 per US dollar. Economist for the Institute for Development of Economics and Finance (Indef), Bhima Yudhistira said, the rupiah weakening occurred consistently until the end of September.
The increase in Bank Indonesia's benchmark interest rate and the intervention of foreign exchange reserves this time apparently did not work to control the rupiah. According to Bhima, there are a number of factors that make the rupiah weaker. First, global factors are influenced by 10-year Treasury Yields or US debt which has reached 3.23 percent. "This indicates that market participants' expectations about the world economy in the long run are likely to worsen. Investors are hunting US debt instruments as flight to quality or seeking safe assets," Bhima said in a written statement on Sunday (10/07/2018). In addition, the US unemployment rate reached 3.7 percent or the lowest in the past 18 years. US employment data per September increased by 134,000 people. Bhima said that this condition is driving a short-term surge in inflation in the US so that the Fed rate is predicted to rise once more this year, four times in 2019, and twice in 2020.
The shock of a Fed rate increase makes investors withdraw funds gradually from developing countries. "Then they choose investment in dollar-denominated assets," Bhima said. At that time, the dollar index was at the level of 95.4 and still likely to rise. This indicates that the super dollar era will still overshadow the economy of developing countries. The worsening US-China trade role still worsens the global economic conditions. Both did not reach agreement in the negotiations.
Goldman Sachs analyzes trade war will gradually reduce large corporate profits in almost the entire world. From Europe, the Brexit polemic and Italy's budget deficit are a frightening specter for market participants. "The Euro currency outlook is still bearish or weakening against the USD," Bhima said. In addition, crude oil prices are predicted to continue to soar despite a slight decline at 84.16 dollars per barrel for the Brent type.
Bhima said, oil price pressures made the oil and gas deficit widen and eventually worsened the current account deficit. Until the end of the year, he said, the main factor in the weakening of the rupiah exchange rate was the increase in crude oil prices and the high level of imports, especially welcoming Christmas and New Year where transportation use increased. While domestic factors affecting the rupiah exchange rate, market participants are still awaiting the release of trade balance data in September 2018, which is planned to be released around October 16.
Pressure on the oil and gas deficit that widened to August was recorded at 8.3 billion US dollars, up 3 billion US dollars compared to the same position last year. On the other hand, the implementation of the IMF-World Bank Annual Meeting in Bali provides fresh air for market participants, especially the sentiment of discussion on the direction of global monetary policy and prevention efforts against the economic crisis. "As the host, there are several investment cooperation programs that will be offered to delegates from 189 countries participating in the annual meeting," Bhima said.