Rupiah Weakens Against Dollar Amid Fed Rate Hike Speculation and Rising Oil Prices

The Indonesian Rupiah saw a slight weakening against the US Dollar at the opening of trading on Monday. The rupiah depreciated by 3 points or 0.02 percent to Rp17,614 per US dollar, from the previous closing of Rp17,611. According to Saudara Rully Nova, an analyst at Bank Woori, the pressure on the rupiah stems from the weakening of most regional currencies, rising oil prices, geopolitical risks, and expectations of an interest rate hike by the Federal Reserve (The Fed) this week. "The rupiah is expected to weaken in today's trade in the range of Rp. 17,600-Rp. 17,680," Rully told Antara in Jakarta, quoted on Monday, September 14. Rully noted that the market anticipates the Fed will raise its interest rate by 25 basis points to 4 percent on Thursday, September 17. This expectation also opens the possibility for Bank Indonesia to adopt a stricter stance in its upcoming Governor's Meeting. Pressure from the US bond market is also a concern. The yield on 10-year US government bonds has approached 5 percent, standing at 4.96 percent, while the dollar index is around 99. Rully also highlighted that the increase in oil prices could add pressure to the government's fiscal space. The state budget's assumption for oil prices is around US$70 per barrel. However, West Texas Intermediate (WTI) crude oil futures for October delivery surpassed US$100 a barrel on Thursday, September 10, reaching US$100.88, its highest level since May 20.