Indonesian Rupiah traded above Rp 14,100 per US dollar.

The Bank Indonesia's 25 basis point (bps) increase in the 7-day Reserve Repo Rate to 4.5% has failed to support the rupiah's movement. Bloomberg data shows that the rupiah closed 98 points (0.7%) weaker at 14,156 per US dollar on Friday (May 18th). This is its lowest level since October 7, 2015. Meanwhile, the Jakarta Interbank Spot Dollar Rate (JISDOR) shows the rupiah at 14,107 per US dollar.

The improving US economy, which allows for up to three more Fed rate hikes by the end of the year, is causing the US dollar to appreciate against major world currencies. This is reflected in the US Dollar Index (DXY) which rose 1.62 points to 93.46. As a result, regional currencies, including the rupiah, are weakening against the US dollar.

Indonesia's improved debt rating has not yet been able to encourage investors to invest in the domestic financial market. Uncertainty in the global financial market related to the Fed's interest rate hikes remains the primary focus of market players. Fund managers are attempting to shift their managed funds from currencies considered risky to safe haven currencies such as the US dollar and Japanese yen. The rupiah exchange rate for the next month is at 14,250 per US dollar and for the next three months at 14,419 per US dollar.