Rupiah Slips on China Slowdown

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  • TEMPO.CO, Jakarta – China's slowing manufacturing index and uncertainties on Fed's fund rate gave the greenback a boost in international currency markets. Yesterday's currency trade sae the rupiah fell 33 points (0.27 percent) to 12,175 per US dollar, sinking along with almost all Asian currencies.

    Money market analyst Lindawati Susanto said the greenback regained its hold in money markets after China's HSBC manufacturing data drops to 50.0, the lowest in six months. The slowdown sparked fears that China's imports from developing countries will also decline.

    "The risk of a spreading economic contraction made investors reluctant to release their dollars."

    According to Linda, the unfriendly global economic climate will prolong the greenback stronghold, complicating the rupiah's efforts to gain as the fuel hike effect will only show later. "The market is still waiting for the current account and government infrastructure spending to improve."

    Fortunately, capital inflows are still growing, keeping the domestic dollar liquidity afloat. Bank Indonesia's (BI) decision to raise its benchmark interest rate (BI Rate) to 7.75 percent was quite effective in averting capital outflows.

    Today the rupiah is expected to move flat between 12,100 and 12,200 per US dollar. The fuel price hike has led the rupiah into a new equilibrium and is expected to stable up for a while.