On Wednesday (01/03) market participants were careful ahead of the first speech of Donald Trump to US Congress. His speech did not, however, alter market sentiments in the remainder of the day.

Trump spoke about the renewal of the American spirit, a new chapter of American greatness, enforcing US immigration laws, while condemning recent vandalism, the Kansas shooting and hate crimes, as well as defending his decision to withdraw from the Trans-Pacific Partnership and to start working on a US-Mexico border wall. He further stated that he remains determined to scrap Obamacare and wants to invest heavily in infrastructure development. He also promised massive tax relief for the middle class, although he provided little specific details.

Trumps speech added few new information that could alter market sentiments on Wednesdays trading day and therefore the Indonesian rupiah changed little after Trumps speech.

Regarding the rupiahs performance in 2017 we expect the currency to depreciate toward the range of 13,700 - 13,900 per US dollar later this year due to several interest rate hikes in the USA, while US economic growth is also expected to accelerate due to Trumps fiscal incentives and rising government spending. The central bank of Indonesia (Bank Indonesia) is also expected to raise its interest rate regime in order to limit the negative impact of US monetary tightening.

However, the rupiah is supported by Indonesias improving economic fundamentals: economic growth is accelerating, inflation and the current account deficit are under control, while commodity prices (and thus Indonesias export performance) are improving. Therefore, rupiah depreciation will not be as sharp as the sliding of other Asian currencies.

Bank Indonesias benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.10 percent to IDR 13,361 per US dollar.

Source : Indonesia Investments

Dec 09, 2017