JAKARTA (TheInsiderStories) – Good morning. The Rupiah had finally gained some strength on Thursday (09/07) after seven consecutive days of losing streak and flirted dangerously close to the level of 15,000 per US$1.
The Rupiah ended up at 14,891 per US$1 versus 14,927 per US$1 on Thursday (06/09). The equity market too recouped some of its losses with the Jakarta Composite Index rose 1.6 per cent to 5,776.
Still, foreign investors continued to sell Indonesian equities, which worth at Rp967 billion (US$66.69 million) on Thursday.
However, the relief on Rupiah is likely to be temporary as US-China trade war is high on the investors’ mind. The US Administration is likely to impose 25 percent import tariffs on Chinese goods worth $200 billion, the largest amount in the ongoing tit-for-tat tariff war between the world’s two largest economy.
The US government had previously enacted tariffs on Chinese goods worth $50 billion. As a retaliatory measure, the Chinese government said it will also impose tariffs on American goods worth $60 billion and reasserted confidence that the ensuing trade war will have a modest impact on its economy.
However, the tariff war might not be the only negative development affecting the financial market on Friday.
The US Labor Department announced that the number of workers claiming unemployment assistance fell by 10,000 to 203,000 on the week ended Sept. 1, near the lowest level in 49 weeks. The drop in unemployment claims exhibited a sustained economic growth in the US which would create further pressures on emerging economies.
Furthermore, the US Treasury Department will sell bills and bonds worth $189 billion next week. This will further attract dollar liquidity out of the emerging markets like Indonesia.
Domestically, the release of Indonesia’s foreign exchange reserves data for August by Bank Indonesia will be keenly anticipated by investors. Indonesia’s foreign exchange reserves stood at $118.31 billion by end of July, falling by $13.67 billion from the end of 2017, as the central bank intervened heavily to contain pressures on the rupiah.
As rupiah was under intense pressure in August, it is highly likely that the amount of reserves will drop again.
The government also intensifies its effort to reduce pressures on the rupiah. After implementing the biodiesel policy to curb crude imports and announcing higher import tariffs on 1,147 tariffs, the government will soon announce a list of infrastructure projects put on hold.
Delaying infrastructure projects would help to reduce imports of capital goods which in turn help to stabilize the rupiah.
From politics, the opposition camp appeared to have been true in its claims that it will not attack the government through the angle of weak rupiah. However, that does not mean opposition politicians cannot score a point.
Sandiaga Uno, a Vice Presidential candidate from the opposition camp, today exchanged $1,000 into the rupiah in a highly-publicized event. The amount is minuscule and Uno himself admitted that the act is part of image branding though the real intention is to set an example.
May you have a profitable day.
TIS Intelligence Team, Email: firstname.lastname@example.org