Rupiah Currency Asian Champion
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The rupiah exchange rate against the US dollar (US) continues to strengthen. Even now the strengthening of the rupiah in front of the greenback is the best in Asia.
On Wednesday (11/14/2018) at 9:06 a.m. WIB, US $ 1 in spot market trading is equivalent to Rp. 14,750. The rupiah strengthened 0.37% compared to the closing position of the previous day's trade. Starting the day, the rupiah only rose slightly by 0.03%. However, as the market progressed, the rupiah became increasingly volatile.
In Asia, the strengthening of the rupiah had become the second best. Now, the rupiah is increasingly crazy going up one rank so that the champion in the Yellow Continent overtakes the Indian rupee.
Following is the development of the US dollar exchange rate against a number of major Asian currencies at 09:07 WIB:
US Dollar vs. Asian Currency
Domestic and external sentiments support the strength of the rupiah. From within the country, investors are beginning to digest that the current account in the fourth quarter of 2018 seems to be improving.
In the third quarter of 2018, Indonesia's current account experienced a fairly large deficit, reaching 3.37% of Gross Domestic Product (GDP). This has been the deepest deficit since quarter II-2014. But in the fourth quarter of 2018 there is hope that the current account will improve. It is still a deficit, but at least not as deep as the previous quarter.
That hope arises from the development of oil prices. As a net oil importer country, Indonesia will benefit when commodity prices fall.
The potential decline in oil prices comes from US 'forgiveness' regarding sanctions to Iran. The Superpower country allows eight countries to continue to import oil from the Persian country for the next 180 days. This means that the oil supply on the world market is not very dragging.
Then the Organization of Petroleum Exporting Countries (OPEC) expects oversupply in 2019. OPEC estimates that world oil demand will rise 1.29 million barrels / day to 31.54 million barrels / day. Meanwhile, oil production next year is estimated to increase 127,000 barrels / day to 32.9 million barrels / day. This means that there is a potential for oversupply of 1.36 million barrels / day.
These sentiments weighed on the price of the black gold, making it difficult to rise significantly. This means that the burden of Indonesia's oil imports can be reduced so that it does not burden the current transaction.
With the improvement of the current account, the rupiah has more reason to be stable and even tends to strengthen. In the past month, the rupiah was able to strengthen 2.24% before the US dollar.
Market participants appreciate this development by collecting rupiah-based assets. At 09:16 WIB, foreign investors booked a net purchase of Rp. 45.97 billion in the stock market which led the Composite Stock Price Index (CSPI) to rise 0.69%. This capital flow is also effective in strengthening the rupiah.
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While on the external side, the rupiah also benefited from the depressed US dollar position. At 9:17 a.m., the Dollar Index (which reflects the greenback's position in front of six major currencies) still weakened 0.28%.
Investors are happy and willing to take risks because of positive developments in Europe. On Wednesday local time, British Prime Minister Theresa May will hold a cabinet meeting to discuss the points of the Brexit agreement.
If there is an agreement in London, the results will be brought to Brussels and discussed at a meeting on November 25. If approved, the European Union will ratify this agreement and Britain can formally separate well.
This hope makes investors excited again. There is no longer the term playing safe, so the US dollar is increasingly abandoned.
Supportive domestic and external factors managed to bring the rupiah to the Asian championship ladder.
Congratulations, rupiah currency.