The Indonesian Rupiah strengthened against the US Dollar amid a growing foreign exchange reserve. According to Refinitiv, the Rupiah closed 0.87% higher at IDR 15,890/USD today, Thursday (August 8, 2024). This aligns with yesterday's trading close (August 7, 2024), which also saw an increase of 0.8%, marking a seven-day streak of appreciation.

Key Points: 

• This rise in reserves is mainly driven by the issuance of global sukuk and increased tax and service income
• Fithra Faisal, a Senior Economist at Samuel Sekuritas Indonesia, highlighted that these strong reserves offer a cushion for maintaining Rupiah stability this month without requiring a rate hike from Bank Indonesia

Courtesy Photo Source: Zaphiel Quinveil on Unsplash

Moreover, this position is the strongest since April 5, 2024, or roughly the last four months.

Meanwhile, the US Dollar Index (DXY) fell by 0.21% to 102.98 at 14:54 WIB, lower than yesterday's position of 103.2. Today's Rupiah appreciation is closely linked to the significant increase in foreign exchange reserves recorded yesterday. Bank Indonesia reported a foreign exchange reserve of USD 145.4 billion for July 2024, up USD 5.2 billion compared to June 2024.

This increase in reserves is largely due to the issuance of global sukuk and tax and service revenues. Furthermore, the end-July 2024 reserves position is equivalent to financing 6.5 months of imports or 6.3 months of imports and government external debt payments, and it is well above the international adequacy standard of around 3 months of imports.

Courtesy Photo Source: bady abbas on Unsplash

Senior Economist at Samuel Sekuritas Indonesia, Fithra Faisal, noted that these solid reserves provide a safe zone for maintaining Rupiah stability this month without the need to push for a Bank Indonesia rate hike.

"Given recent developments and the greater likelihood that the US Federal Reserve may cut interest rates sooner than previously expected, Bank Indonesia might have more leeway to keep its benchmark interest rate unchanged," Fithra explained.

Courtesy Source:www.cnbcindonesia.com