"The deflation is one of the triggers of the rupiah`s appreciation against the dollar so it is expected the inflation in the upcoming months can be controlled," money market observer Ruly Nova said.
Jakarta (ANTARA News) - The Indonesian rupiah gained ground against the US dollar on Monday evening after the Central Statistics Agency (BPS) announced earlier in the day the country recorded a deflation of 0.03 percent in May.

The rupiah traded at Rp9,813 per dollar in the Jakarta interbank spot market on Monday evening, up 69 points from the previous close of Rp9,882 per dollar.

"The deflation is one of the triggers of the rupiah`s appreciation against the dollar so it is expected the inflation in the upcoming months can be controlled," money market observer Ruly Nova of Bank Himpunan Saudara said.

That a number of areas in the country are entering harvest time has led to the smooth distribution of food stuffs, he said.

In addition, the dollar`s exchange rate which is currently in the negative area against other major global currencies also has caused the rupiah to strengthen, he said.

After all, a deficit in the country`s oil and gas trade balance will still haunt the rupiah`s movement, he said.

The BPS said earlier in the day the country recorded a deflation of 0.03 percent in May, the first in the same month over the past decade.

May`s deflation brings total inflation this year to 2.3 percent and year-on-year inflation to 5.64 percent.

Inflation eased to 5.57 percent in April after hitting a 22-month high of 5.9 percent in March as food prices declined.

Trust Securities Research Chief Reza Priyambada meanwhile said the lower-than-estimated US economic data have added to pressure on the dollar, causing the rupiah to strengthen early this week.

He said the US gross domestic product (GDP) which grew 2.4 percent or 0.1 percent lower than the estimate of 2.5 percent has created a negative sentiment to the dollar.

The rising US unemployment data prompted market players to speculate that The Fed`s stimulus will still be needed, he said. (*)

Editor: Heru Purwanto
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