Rupiah Inches Up as China Central Bank Cuts Interest Rate

TEMPO.CO, Jakarta - The rupiah exchange rate climbed in today's trade close, July 23. Director of PT Laba Forexindo Berjangka, Ibrahim Assuabi, said that the currency appreciation was an effect of interest rate cuts by China's central bank.

Amid the strong rise of the US dollar, China's interest rate cut manages to encourage the Indonesian exchange rate to remain strong. "Today the rupiah strengthened, but the strengthening was slight," Ibrahim said by phone on Tuesday, July 23.

The rupiah ended today's trading with a 6-point gain to close at 16,214 per U.S. dollar, up 0.04 percent from Monday's 16,220.

Ibrahim said that although the dollar is rising, sentiment from China's key rate cut helped push the rupiah higher given the country's strong trade ties with Indonesia. 

Reuters reported that the People's Bank of China unexpectedly cut its short-term benchmark interest rate and the benchmark lending rate on July 22. The seven-day reverse repurchase rate was cut to 1.7 percent from 1.8 percent. Meanwhile, the one-year lending rate was cut to 3.35 percent from 3.45 percent and the five-year LPR to 3.85 percent from 3.95 percent.

US Elections Chaos

Meanwhile, the dollar's position will be heavily influenced by the growing uncertainty surrounding the U.S. presidential election. President Joe Biden's announcement via social media that he was withdrawing from re-election and endorsing Vice President Kamala Harris, as well as the attempted assassination of Donald Trump, have also had a bullish effect on the greenback.

"We are seeing a wave of fluctuations because the failed assassination attempt increased Trump's electability," he said.

Going forward, he said, the rupiah could still gain very slightly due to growing optimism that the Federal Reserve will start lowering its key interest rate from September next year. "The Fed will meet next week and is expected to keep interest rates steady at that time," he said.

For tomorrow's trading, Ibrahim predicts the rupiah will fluctuate and close between 16,200 and 16,260 per US dollar.

Ilona Estherina

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