Jakarta. The rupiah exchange rate remains volatile at the end of this week. On Friday (11/11), the rupiah had touched the level of Rp 13,800 per US dollar and closed at Rp 13,383 per US dollar or eroded by 1.86% compared to the previous day.

The result of the US presidential election, which was in favor of Donald Trump, has led to unease in market. Since the presidential election’s polling day (8/11), rupiah has displaced by 2.28%. Fortunately, the positive trend has been overshadowing rupiah since 2015, so that rupiah strengthened by 2.93%.

Economist at Kenta Institute Eric Sugandi explained that there are three factors that cause market’s unease yesterday.

First, market’s perceptions about the US economic outlook and the chances of The Fed’s interest rate rise that can be more aggressive.

Trump is expected to implement expansionary fiscal policy easing and corporate tax cuts, which may boost the country's economy. Eric expected that emerging markets, including Indonesia will experience high capital outflows.

Second, ahead of the end of the year, the needs for the US dollar in the country are high to repatriate profits and debts payments. Third, the distributions of foreign exchange (forex) in domestic financial markets are uneven.

However, Eric predicts that the pressures over rupiah would not last long. The domestic economy remains strong and can survive rupiah at the levels of Rp 12,800-Rp 13,300. BI (the Central Bank) will also intervene in the market if the rupiah exchange rate is approaching to Rp 13,800.

Economist at Samuel Asset Management Lana Soelistianingsih said that the market was quite surprised when the US dollar exchange rate in the non-deliverable forward (NDF) rocketed sharply. This triggered market concerns over the state of the US after Trump delivered his victory speech.

The 45th US President plans to hoist the military budget and infrastructure while cutting employers tax.

According to Lana, Trump policy could potentially make the US budget deficit widened so that the government will cover the budget with debts. This will raise the yields of the US bonds.

“It is related to the position of Indonesia, in which the foreign shares in the bond market is quite large," said Lana.

But, with the positive domestic fundamentals , as well as government and BI’s efforts to maintain the exchange rate, Lana optimistic that the rupiah will return to the levels of Rp 13,000-Rp 13,100 at the end of the year.

(MUHAMMAD FARID/Translator)

Editor: Adi Wikanto