Rupiah continued on the decline in value against the U.S. dollar despite the Central Bank`s decision raising its benchmark interest by 25 basis points on Thursday.
Rupiah traded at the level of 14,106 per dollar or losing 51 point in inter-bank transaction on Friday morning from the previous closing.
The IHSG closed 32.51 points or 0.56 percent to 5,783.31 points with the index of 45 most liquid stocks down 0.86 percent to 918.89 points.
"Shrinking rupiah was a factor bringing down the IHSG to the negative areas," Analyst of Teknikal Panin Sekuritas William rtanto said here.
William said after Bank Indonesia decided to raise its benchmark interest rate, rupiah was expe3cted to regain strength to the level of less than 14,000 per dollar, but the pressure on the national currency is bigger than the support the central bank had provided.
"The expectation in the market was that the rise in the benchmark interest rate could prop up rupiah but it was not as expected," he said.
A monthly meeting of the Broad of Governors of Bank Indonesia on May 16-17, 2018 decided to raise the BI 7-day Reverse Repo Rate by 25 basis points to 4.50 percent and the interest rate of Deposit Facility was increased 25 basis points to 3.75 percent and the Lending Facility was up 25 basis points to 5.25 percent, effective as from Friday.
The rise in the interest rates triggered a move of fund from the stock market to bond market. When interest rate rise, bond yield tends to rise that attract investors.
Frequency of transactions in the trade at the stock market on Friday were recorded at 352,204 times with 8.287 billion shares valued at Rp7.387 trillion changing hand. Gainers were 149 against decliners of 237 with 120 shares remaining flat.
Regional markets such as Nikkei and Hang Seng recorded an increase in index and Straits Times recorded a decline in index.
Economists and observers an increase of 25 basis points in Bank Indonesia`s benchmark interest rate was not enough to cushion the impact of the rise in the Fund rate of the U.S. Central Bank. They said the Indonesian Central Bank should at least raise its benchmark interest rate by 50 basis points to 4.75 percent.
Economists and observers have called on Bank Indonesia since last week to raise its interest rate to prevent the national currency from losing more value against the U.S. dollar.
Heavier pressure on rupiah as well as on most currencies of developing economies is expected later this year when the U.S. Central Bank raises further its fund rate to follow the recover of the World`s largest economy .
(AS/H-YH)
(T.SYS/A/H-ASG/A/H-YH)
Reporter: antara
Editor: Heru Purwanto
Copyright © ANTARA 2018
