Rupiah Forecast to Weaken Amid Rising Oil Prices, Higher U.S. Treasury Yields

Bank Mandiri's Office of the Chief Economist predicts that the Indonesian rupiah exchange rate will weaken in today's trading, moving within a range of Rp17,590-17,685 per US dollar. The forecast is influenced by rising global oil prices, increasing U.S. Treasury yields, and expectations of a Federal Reserve interest rate hike.

Bank Mandiri Head Economist Andry Asmoro stated that the rupiah's potential depreciation may be limited by the relatively stable DXY index and positive foreign capital inflows in the bond market. However, crude oil prices rose to US$107 per barrel on Monday morning after previously falling to US$104.6 per barrel.

The increase in oil prices is attributed to new attacks on Saudi Arabian energy infrastructure and ships in the Gulf, raising concerns about global oil supply disruptions and re-triggering inflationary pressure. Fakhrul Fulvian, chief economist at Trimegah Sekuritas Indonesia, believes that Indonesia should prepare for a period of higher global financing costs due to increasing expectations of a Fed interest rate hike.

Fakhrul emphasized the importance of a comprehensive policy toolkit, including spot interventions, Domestic Non-Deliverable Forward (DNDF), liquidity management, and other instruments. He predicts that the rupiah's depreciation will be relatively limited if appropriate policy responses are made, with the potential rupiah depreciation reaching Rp17,800 per US dollar.