Morning Briefing: Rupiah Slumps as Dollar Gains Strength from US Trade Deal

Indonesian financial market keep sagging amid the various negative news from global and domestic - Photo: Special

JAKARTA (TheInsiderStories) – Good morning. The Rupiah suffered from a beating on Tuesday as the announcement that the United States (US), Mexico and Canada had agreed to a trade deal that will replaceNorth America Free Trade Agreement (NAFTA) lends a strength to the greenback.

The trade deal, named United State-Mexico-Canada Agreement (USMCA), heads toward the direction that the US administration wanted. In particular, the new pact will provide a positive catalyst for the US dairy and automotive industry.

The pact is expected to be officially signed on Dec. 1, 2017 before pushing through parliaments in each of the three nations for ratification.

Yesterday, the Rupiah slumped to 14,988 per US$1 from 14,905 per US$1 as the trade deal underpins ongoing sentiments on the accelerating growth of the US economy. While, the Jakarta Composite Index fell 1.2 per cent to 5,876 with foreign investors net sold equity worth Rp98.7 billion.

The domestic financial market could be under pressure again on Wednesday due to remarks by the Federal Reserve (Fed) Chair Jerome Powell. Powell, who spoke in a business conference in Boston, said the ensuing trade war has the potential to drive prices up, though the Fed is ready to act ‘with authority’ if inflation expectation in the US economy drifts from the 2 per cent goal.

Oil price is also a factor that gives pressures to the rupiah as Indonesia needs to import the commodity to meet domestic demand. The price of the commodity was near a four-year high as the market is under bullish momentum due to tight supply concerns ahead of sanctions on Iran.

Domestically, the biggest news still come from the earthquake-triggered Tsunami that hit Palu, the capital of Central Sulawesi, on Friday afternoon.

The latest count of fatalities from the disaster was 1,234 deaths and is expected to rise as rescue teams still scrambling to reach several remote areas. Many of the humanitarian assistance were still unable to reach the disaster areas, leaving survivors with little supplies of food, clear water and medicines.

According to the latest estimate, the disaster had displaced more than 60,000 residents from the affected area.

After making an appeal for international assistance, the government said offers from 26 countries had been extended. The priority for the government is to provide speed assistance deliveries through the affected area via air drop.

The disaster mitigation agency said the financial damage from the disaster is estimated at Rp10 trillion ($689.66 million). The agency has secured an approval for Rp560 billion budget for rescue efforts.

From politics, controversies came after Ratna Sarumpaet, a political activist close to the opposition camp, revealed that she had been violently abused by a group of unknown people on September 21.

The circumstances surrounding the abuse, however, were rather mysterious as Sarumpaet refused to file a police report and herself remains active in her twitter account days after the alleged incident.

The opposition camp, however, was quick to gather around Sarumpaet and called the incident as an example of oppression by the government, with little evidence to back the claim.

The opposition’s Presidential Candidate Prabowo Subianto even visited Sarumpaet and held a press conference detailing the alleged incident.

US$1: Rp14,500

May you have profitable day.

Written by TIS Intelligence Team