Rupiah strengthens as investors brace for Fed's announcement

Rupiah strengthens as investors brace for Fed's announcement

An employee counting rupiah notes at a money changer in Jakarta. (ANTARA PHOTO/Sigid Kurniawan/bp)

Jakarta (ANTARA) - The exchange rate of the rupiah transacted between banks in Jakarta on Wednesday afternoon strengthened, as investors awaited the US Federal Reserve's (The Fed’s) key announcement of the monetary policy.

The Indonesian currency strengthened six points, or 0.04 percent, to Rp14,022 per US dollar, from the earlier Rp14,028 per US dollar.

"The market is in a wait and see mode and looks ahead to the outcome of the Federal Reserve meeting later in the day when policymakers are expected to cut interest rates for the first time since 2008," PT Garuda Futures' Managing Director Ibrahim Assuaibi noted here on Wednesday.

With the market forecasting the Fed to cut interest rates by 25 basis points, Assuaibi noted that the main focus is whether the Fed will leave the door open for further policy easing in a bid to protect the world's largest economy from slowing global growth and the impact of trade conflicts.

On the domestic front, the movement of the rupiah today was influenced by the Deposit Insurance Agency (LPS) Board of Commissioners’ meeting that decided to cut the interest rates on rupiah deposits in commercial banks by 25 basis points (bps), i.e., 6.75 percent, and in rural banks to 9.25 percent, while the guaranteed interest rate in foreign exchange at commercial banks remained at 2.25 percent.

Changes in the deposit guarantee interest rates are based on several factors including the banking interest rates being monitored at a stable level as well as potential to decline, conditions and risk of banking liquidity being relatively well-maintained amid the trend of rising deposit growth, and domestic financial system stability being monitored in accordance with easing volatility in financial markets.

The rupiah opened at Rp14,020 in the morning. During the day, the rupiah hovered in the range of Rp14,009 per US dollar to Rp14,028 per US dollar.

In the meantime, Bank Indonesia's middle exchange rate on Wednesday showed that the rupiah strengthened to Rp14,026 per US dollar as compared to Rp14,034 per US dollar on the previous day.

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