Rupiah Strengthens to Rp17,640: What Drove the Gain?

The rupiah edged higher against the US dollar on Monday, closing at Rp17,640, up two points from its previous close of Rp17,642. The currency had fallen by as much as 25 points during the session.

Currency and commodities analyst Ibrahim Assuaibi expects volatility to continue on Tuesday, when he projects the rupiah could close between Rp17,640 and Rp17,680 per dollar. He pointed to rising tensions between the United States and Iran as a major external factor for markets.

The US military said it struck three Iranian oil tankers after Iranian forces targeted a US Navy vessel with ballistic missiles. Iran later said it had hit a US Navy drone and warned that any further US strikes would receive a harsher response. The escalation has increased concern over commercial shipping and energy transit through the Strait of Hormuz.

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More than 162,000 Americans joined the workforce in August, far exceeding the projected 56,000, while the July figure was revised upward from minus 23,000 to 21,000.

Investors are also watching US economic data. Assuaibi said more than 162,000 Americans joined the workforce in August, far above the projected 56,000, while July’s figure was revised from a loss of 23,000 to an increase of 21,000. The US unemployment rate stood at 4.1%, below the Federal Reserve’s year-end forecast of 4.5%.

The strong labor market could shift the Fed’s attention back to inflation. Investors are therefore awaiting the week’s Consumer Price Index and Producer Price Index releases before the September Federal Open Market Committee meeting. Higher inflation readings could renew concerns about changes in US monetary policy.

In Indonesia, Assuaibi described the week as a test of monetary-policy flexibility. The government and Bank Indonesia must ensure that stimulus does not increase pressure on the rupiah or prompt foreign capital outflows. Markets are also assessing the effects of natural disasters, including the Mount Anak Krakatau eruption, peatland fires in Kalimantan and parts of Sumatra, and falling water levels in the Barito River. The article ends while describing the risks to economic operations and supply chains.

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The market is also continuing to evaluate the impact of recent natural disasters on national economic activity, including the eruption of Mount Anak Krakatau.