Second-Largest Rupiah Strengthening in Asia

Following the increase in the BI 7-day Reserve Repo Rate, the Indonesian Rupiah strengthened against the US dollar. On Tuesday (June 5th), until 12:40 WIB, the Rupiah exchange rate, based on Bloomberg data, was traded at 13,883/US dollar, strengthening by 0.8% from its position on May 29th at Rp 13,995/US dollar. The Rupiah's strengthening over the past week outperformed the Singapore dollar's 0.75% increase. Meanwhile, the Indian Rupee recorded the largest strengthening, at 0.98% in five trading days.

To stabilize the Rupiah exchange rate, which had been pressured to above Rp 14,000/US dollar, Bank Indonesia held an additional Board of Governors Meeting (RDG) on May 30, 2018. In this RDG, Indonesia's central bank again raised its benchmark interest rate, the BI 7-day Rate, by 25 basis points (bps) to 4.75%. Thus, in May 2018, BI raised its benchmark interest rate by a total of 50 bps.

The Rupiah's strengthening was also supported by the weakening of the US dollar against world currencies. This is reflected in the US dollar index (DXY), which fell to 98.08 from 94.82 on May 29th. The easing of concerns about global uncertainty led market players to divest their portfolios in US dollars and shift them to assets in high-yielding currencies, such as those in emerging markets. This allowed the Rupiah to strengthen to below Rp 13,900/US dollar in early June.