The rupiah exchange rate in the spot market trading rose 0.5% to Rp 14,920 per US dollar. The most powerful Rupiah among the majority of Asian currencies after Bank Indonesia announced April foreign exchange reserves data which increased US$ 5.9 billion to US$ 127.9 billion.

While the Jakarta Interbank Spot Dollar Rate reference rate published by BI at 10.00 WIB also placed the rupiah in the position of Rp 15,009 per US dollar, strengthening 118 points compared to yesterday.

The majority of Asian currencies also strengthened against the US dollar. Chinese yuan nails 0.09%, Thai baht 0.34%, Indian rupees 0.28%, South Korean won 0.42%, Taiwan dollars 0.19%, and Philippine pesos 0.27%, and Singapore dollars 0, 11%. While the Japanese yen, Hong Kong dollar and Malaysian ringgit were down 0.08%, 0.01% and 0.24% respectively.

Core Indonesia Research Director Piter Abdullah explained the strengthening of the rupiah amid the ongoing coronavirus pandemic occurred unexpectedly. Since last Wednesday the Rupiah has even strengthened to a level below Rp. 15 thousand per US dollar.

"The strengthening of the rupiah shows that there is no more market panic due to the Covid-19 epidemic. Investors have accepted the economic slowdown that is happening in the world and domestically," Piter told Katadata.co.id, Friday (8/5).

Rupiah Strengthens In Wednesday Trading

Piter explained that investors are now more realistic and are starting to take risks. Investors are starting to enter the Indonesian financial market, which now looks cheap. "Nevertheless this phenomenon is still very vulnerable and temporary," he explained.

The Rupiah had weakened at the opening of the market as shown in the database below but moved to strengthen after the announcement of BI's foreign exchange reserves data. The rupiah exchange rate in the spot market trading, Wednesday (6/5) rose 0.56% to a level of Rp 14,995 per US dollar. 

Rupiah strengthened influenced the optimism of the US Central Bank, The Federal Reserve, that Uncle Sam's economy is improving in the second half of this year. Apart from the rupiah, several Asian currencies also appeared to be strengthening. Citing Bloomberg, the Japanese yen rose 0.24%, the Hong Kong dollar 0.02%, and the Philippine peso 0.11%.

However, the majority of Asian currencies weakened. The Singapore dollar fell 0.25%, the Taiwan dollar 0.24%, the South Korean won and Indian rupees 0.17% each, the Chinese yuan 0.47%, the Malaysian ringgit 0.35%, and the Thai baht 0.19%.

Estimates of Rupiah Movement That Will Continue to Rise

BI Governor Perry Warjiyo explained the positive news from the US caused the rupiah exchange rate to improve today. "The statement of the Fed members who said the US economy will improve in the second semester brought a positive factor," Perry said in a video conference in Jakarta, Wednesday (6/5). 

Also, he considered positive sentiment also came from the opening of US and European economic activities, as well as an increase in oil prices. However, Perry estimates that the movement of the rupiah will still fluctuate in the short term. 

Some negative sentiments that can influence exchange rate movements are tensions between the US and China, tensions between North and South Korea, and the ruling of the German Constitutional Court. He continued, the German Constitutional Court ruled that quantitative easing by the European Central Bank was unconstitutional. 

"Because it is not supported by an EU agreement unless the ECB can justify and explain it within 3 months," he said. Although the movement of the rupiah exchange rate will still go up and down, Perry said the movement of the exchange rate is a trend influenced by several fundamental factors. First, low and controlled inflation within the target range of 3 ± 1%.

Second, the estimated current account deficit in the first quarter will be lower than 1.5% of GDP and overall in 2020 will be lower than 2% of GDP. Third, differences in interest rates or yield spreads of RI are very high compared to other countries. Indonesia's 10-year SBN yield was 8.02% while the yield on the 10-year UST Note was 0.3% -04%.