The Rupiah exchange rate strengthened against the US dollar in trading on Friday, 9 February 2022. DCFX Futures Chief Analyst Lukaman Leong said that the strengthening of the Rupiah today was also due to the weakening of the US dollar.

"The strengthening of the rupiah was also supported by the release of Indonesian consumer confidence index data, which rose higher than expected," said Lukman. He also noted that the Rupiah still has the potential to strengthen.

"With the absence of data from the US in the next few days, the risk-on sentiment in the market and the US dollar, which will continue to weaken, will support Rupiah," said Lukman Leong. Meanwhile, Bank Permata Economist Josua Pardede also said something else.

He said that the strengthening of the Rupiah today occurred amid a market that still sees the probability of an increase in the Fed's interest rate exceeding the target, which is 5.25%. Therefore, Josua predicts that the Rupiah will increase tomorrow.

Positive Sentiment After Bank Indonesia Raises Its Key Interest Rate to 5.75%, And This Effect Until 9 February 2023

"For today's Rupiah, the movement is supported mainly by the news that Indonesia's foreign exchange reserves at the end of January 2023 have increased compared to the position at the end of last December.

Indonesia's foreign exchange reserves at the end of January 2023 reached US$139.4 billion. This has also increased compared to their position at the end of last December.

The increase in the role of foreign exchange reserves is said to be related to the issuance of the government's global bonds. Thus, it Rupiah managed to stop its two consecutive days of decline against the US dollar.

The ongoing strengthening of the US dollar index is also due to the less aggressive FED. Thus, Powell said that interest rates could go higher. Technically, the Rupiah is still stuck in a stable zone.

This zone will also be the key to movement, and this level is the 50% Fibonacci Retracement drawn from a low point some time ago. Experts predict that this position will make it difficult for the Rupiah to increase again.

Furthermore, the value of the Rupiah currency has resumed its positive trend by ending trading in the green zone. The FED, which will also reduce its aggressiveness in setting interest rates and market expectations, will weaken the dollar.

The strengthening of the Rupiah was mainly driven by Indonesian economic data, which is still on a strengthening trend. Meanwhile, some time ago, Bank Indonesia set a new interest rate. Bank Indonesia is now raising its key interest rate to 5.75%.

The central bank of Indonesia raised its benchmark interest rate by 25 bps. In a statement, Bank Indonesia said that the rate hike is a front-loaded, pre-emptive, and forward-looking follow-up measure. This will help them continue lowing inflation expectations and inflation.

Bank Indonesia Reports $2 Billion Rise in Forex Reserves

Bank Indonesia has two key tasks: keeping Indonesian inflation under control and establishing a safeguard for a stable rupiah rate. About this thing. Indonesia is classified as a country that is in a safe environment as inflation has not spiraled out of control, and BI remains easy.

Meanwhile, the Rupiah also continued to strengthen against the US dollar. This is a good step for Bank Indonesia, especially after releasing the forex reserves that BI has. Most recently, Bank Indonesia reported a $2 billion rise in Forex Reserves and Rupiah movement.

In addition, if the Rupiah exchange rate continues to weaken, some economists say that this will have an impact. This unstable Rupiah exchange rate can affect inflation and interest rates. In addition, imported goods will be cheaper and not threaten state debt obligations.

Indonesia's economy is rising and falling; no one can predict it. However, according to various parties, Bank Indonesia's performance was quite good. This is proven by the steps taken by Bank Indonesia, which brought Rupiah interest rates to a favorable position.