JAKARTA (TheInsiderStories) – The Rupiah entered its sixth day of losing streaks and foreign investors continued to pull out their fund from the stock market as risk-averse sentiments grew stronger due to the rise in yields of US treasuries.
The Rupiah weakened from 15,193 per US$1 to 15,233 per US$1, a level not seen since the end of the Asian financial crisis in 1998. While, the Jakarta Composite Index gained 0.62 per cent to 5,797 as expectations over strong corporate earnings helped to offset risk-averse sentiments by foreign investors, who pulled out Rp300 billion (US$20.69 million) from the equity market on Tuesday (09/10).
The chief rationale behind the risk-averse sentiments was the rise in the benchmark US 10-year treasury which reached the highest level in seven years on Monday, which market participants saw will lead to an accelerating inflation rate and more expensive cost of money. The treasury yield had made slight dip in the early trading hours on Tuesday.
Stock market investors will trade selectively due to expectations for strong corporate earnings for the nine month period, which will start to be released on the coming days. Corporate earnings had been robust despite the economic growth was somewhat disappointing.
Market participants can also gauge the overall economic performance through corporate earnings. The financial performance of banks or non-bank financial institutions will be one to be monitored closely due to the rupiah’s steep fall of late.
Finance Minister Sri Mulyani Indrawati said the Rupiah’s fall was a response to external development and the pressures may continue until next year as the new equilibrium had not been met.
Still, pressures will not go away and this time will come from the revision of economic growth outlook by the International Monetary Fund. The Washington-based institution lowered its projection on the global growth for both 2018 and 2019 to 3.7 per cent from 3.9 per cent earlier, citing impacts of escalating trade tensions and tighter financial conditions.
Commenting on Rupiah‘s condition, Vice President Jusuf Kalla assessed that there were several factors that influence the local currency this week.
“Of course there are also problems from the outside, there are also problems from within. So both of them,” he said at the Vice President’s Office on Tuesday (09/10).
Kalla admitted that the government had difficulty taking steps to boost the Rupiah due to pressure from abroad. But for domestic factors, he said the government would try to reduce imports and Bank Indonesia continued to make efforts to stabilize the rupiah through foreign exchange reserves to the money market. ”
“Intervened by BI. If it is not possible, the government will save imports. Only that,” said by Kalla.
The Rupiah’s fall is a fodder in the opposition’s attack against the ruling coalition, which had been very active in making quick responses against the assault. Presidential candidate Prabowo Subianto highlighted, most of the national wealth is controlled by only one percent of the community.
He continued, there was an injustice for most people. Injustice also causes a weak community economy. That, said Subianto, was marked by the recent weakening of the Rupiah.
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