"The weakening of the rupiahs exchange rate was chiefly caused by strong US economic data, which strengthened the dollar against other major global currencies," Guntur Tri Hariyanto, an analyst with local rating agency Pemeringkat Efek Indonesia said here on Monday.
Hariyanto noted that the US manpower data continued a strengthening trend. In February 2015, about 295,000 new non-agricultural jobs were created in the US.
The increase in the number of new jobs has lowered the unemployment rate in the US from 5.7 percent to 5.5 percent, the lowest since May 2008, he explained.
"The strengthening of the US economic data has shored up expectation that the US Federal Reserve will raise its Fed fund rate soon and has prompted negative sentiment towards the domestic capital market and foreign exchange market," he added.
After all, deflation recorded in January and February 2015 raised expectations that Bank Indonesia would lower its benchmark interest rate (BI Rate), he remarked.
A decline in BI Rate would hopefully boost Indonesias economic growth in the future, he noted.
"Yet, any drop in BI Rate must be accompanied by efforts to improve the countrys current account deficit. Thats how we can benefit from a low interest rate amidst the rupiahs weakening," he pointed out.
Bank Indonesias mid rate shows that the local unit weakened to Rp13,047 on Monday as compared to Rp12,983 per dollar last Friday.(*)
Editor: Heru Purwanto
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