Rupiah plunges to 16-year low

Indonesia’s currency fell last week against the greenback to its lowest level since the financial crisis in 1998. USD/IDR has gained over 10% since March, when the rupiah was the strongest this year.

US notes
Source: Bloomberg

After hitting the 16-year high of 12,725, USD/IDR has since pulled back slightly.

A range of factors has intensified the recent weakness in the rupiah.

This includes the seasonal factor where there is growing demand for US currency to settle year-end foreign loan debts.

Rising expectations of a US interest rate hike has also lent some strength to the greenback against currencies from many emerging economies.

While Indonesia’s current account deficit has improved since the last crisis, there has been rising pessimism over its state amid the sluggish global economic outlook.

A key part of Indonesia’s growth is driven by its commodity exports that hinges on China’s economic revival. So far, recent indicators on the Chinese economy have still not shown much traction, with soft data from manufacturing, property and exports.

On a weekly chart, an upward channel formed since April for USD/IDR. An attractive opportunity to buy will be when a pullback brings the pair near the resistance level provided by the lower limit of the channel.

Click to enlarge

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.