US Bond Selling Pressure Pushes Rupiah Lower

RRI.CO.ID, Jakarta - Selling pressure on US government bonds is intensifying, pushing the Indonesian rupiah closer to the psychological level of 18,000 per US dollar.

The yield on the 10-year US Treasury rose above 5% again, reaching around 5.12% in morning trading. At the same time, the US Dollar Index also increased to 101.15.

These two factors are putting more strain on the rupiah today. The renewed selling of US bonds shows that investors are still looking for higher returns, while also suggesting that the Fed's current interest rate level may not yet be restrictive enough for the market.

The rupiah weakened to around 17,890 per US dollar in morning trading. Negative external sentiment remains the main factor behind the rupiah's decline.

Financial markets are now trying to find their footing. This adjustment could create additional pressure on Indonesia's financial sector.

The stronger US Dollar Index and higher US Treasury yields could push the rupiah closer to the 18,000 level. Another concern is the worsening geopolitical situation, which is highly volatile and create more downward momentum on financial markets.

The headwinds could escalate if the possibility of another US interest rate hike becomes more likely. This could also trigger corrections in Indonesia's financial markets and put further pressure on commodity prices, especially gold.

The Indonesian Stock Exchange Composite Index, or IHSG, also opened lower at around 6,364. The index moved into negative territory, following declines in most Asian stock markets.

Both the rupiah and the IHSG are expected to remain weighed down during today's trading session. Meanwhile, global gold prices also came under pressure.

Gold was trading at around $4,290 per troy ounce, or about Rp2.48 million per gram. Higher Brent crude oil prices, which reached around $102 per barrel, together with a stronger US Dollar Index, contributed to the decline in gold prices.

Writer: Gunawan Benjamin (Economist, UISU)