Rupiah Might Dip on Trade Deficit: Analyst

TEMPO.CO, Jakarta – The rupiah is likely to depreciate this week, according to analyst, triggered by investors' negative expectation on another trade balance deficit and uncertainties regarding the subsidized fuel price hike.

"Analysts projected September 2014's trade deficit at US$150 million, so that the rupiah will weaken again," Bank Internasional Indonesia economist Juniman said last week.

Juniman said, market players are pessimistic about Indonesia's economic outlook following an export slowdown due to the weak global demand—especially from Europe and China. He added that pressure on the trade balance will increase the demand for US dollars in the domestic market, making it more difficult for the rupiah to strengthen.

"There is a risk the rupiah will continue its correction to 12,250-12,300 per US dollar," he projected.

Additionally, he said, uncertainties regarding the price hike of subsidized fuel are causing investors to doubt the government's commitment on fiscal reform. Delaying the hike, he said, would make the government lose momentum and increase the risk from having oil speculators.

However, Juniman admitted that increasing fuel prices will only help the rupiah gain temporarily. An oil price hike, he said, will eventually lead to inflation and a possible rise in interest rates, ergo prices of goods will go up and the rupiah will be depreciated.

"For the start of this week, the rate is expected to be in the range of Rp12,080 to Rp12,200 per US dollar with a tendency to weaken," Juniman said. 

PDAT | M. AZHAR