Rupiah Strengthens with Growing Anxiety over US Economy

TEMPO.CO, Jakarta – Global investors' doubt over the United States' economy pushed regional exchange rates to strengthen against the US dollar near closing time. The rupiah, which briefly touched a rate of Rp12.001 per US dollar, managed to climb back up just in time, closing at Rp11,989.3 per US dollar.

BNI Securities economist Heru Irvansyah said that fears of a declining US economic growth in the first quarter caused the dollar to reverse its course, and made in dollar-denominated assets less attractive to global investors.

"After [The Fed] failed to provide clarity over its plan to raise interest rates, negative expectations of a negative first quarter economic growth in American made investors increasingly skittish against the US dollar," he said.

Heru said the growing anxiety is also triggered by speculations over America's involvement in the Iraqi civil war. Secretary of State John Kerry's meeting with Iraqi's government officials is seen by market participants as a sign that America will hold military interventions.

Practically, investors believed that the policy will disrupt the US economic recovery. "It's hard to believe the US economy will grow normally if Uncle Sam takes part in the sectarian conflict," he said.

However, he warned that the rupiah will still have difficulties to strengthen in the near future because there is still a high dollar demand from corporation to pay short-term debts and dividend payouts.

For the time being, Heru said, the rupiah will be moving weakly in the range of Rp11,850 to Rp12,050 per US dollar. With unbalanced demand and dollars liquidity in the domestic market, the US dollar is likely to continue gaining strength.

MEGEL JEKSON