The Rupiah exchange rate strengthened against the US Dollar at the level of Rp14,140. However, the Rupiah is still vulnerable to correction due to the instability of China's economy that has global impacts. The Rupiah exchange rate strengthened against the US Dollar. The Rupiah rose from yesterday's closing level at Rp 14,145 to Rp 14,140 per USD. Today's gain continues the increase for the previous 2 days. The US dollar had tried to recover, but it still failed because the buying sentiment that supports less able to overcome the bullish Rupiah.

Supported by The Fed’s Dovish Sentiment and US Inflation

The President Director of PT Garuda Berjangka, Ibrahim, revealed a number of key sentiments that triggered the Rupiah to rise today. First is the Fed's statement that tends to Dovish. According to him, policy makers at the US central bank could determine interest rates in any direction this year. He concluded from the release of the FOMC minutes published early yesterday. 

Then, the US core inflation data in March 2019 which missed expectations, also contributed to the pressure on the US Dollar. "The effect of dovish comments gives a positive sentiment for the Rupiah. The rupiah in today's trade is likely to still strengthen at the level of Rp 14,110 per US Dollar to Rp 14,190 per US Dollar," Ibrahim was quoted as saying by CNN Indonesia.

Rupiah is Still Vulnerable To Corrections

Despite strengthening, the Rupiah is still overshadowed by a correction. The reason is the emergence of risks of a global economic slowdown, which was dragged down by a decline in China's economic conditions. This resulted in investors hesitating to enter Asian financial markets, including Indonesia.

This was confirmed by the statement of Deputy Managing Director of the International Monetary Fund (IMF), Mitsuhiro Furukawa, who said that if China's economic growth was slower than expected, the impact would be felt globally. "The cause is trade friction, which not only affects trading volume but also investment. If China's economic growth is slower than expected, the risk will be global," Furukawa was quoted as saying by Reuters.

The Trigger of The Strengthening of Rupiah

Different from the weakening of the composite stock price index (IHSG), the rupiah exchange rate throughout the week is still "saved" in the green lane thanks to positive sentiment of peaceful trade and the commitment of Bank Indonesia (BI) to maintain the Garuda Currency. In the second week of April the rupiah exchange rate was recorded to increase 0.49% with a volatile movement. Had strengthened on Monday and Tuesday, the rupiah weakened on Wednesday to 14,145 per US dollar (US) before continuing to strengthen to touch the level of 14,090.

The strengthening of the Garuda currency is in line with the appreciation of several major currencies in the Asian Region in response to indications that the intensity of the trade war between the US and China will recede. This belief was driven by the fact that Chinese exports (as of March) shot 14.2% on an annual basis, well above the consensus collected by Reuters by 7.3%.Although there are indications that domestic consumption has slowed somewhat, following a drop in imports per March of 7.6% on an annual basis, this is considered temporary because bank credit in the country is still growing significantly.

Credit lending data in March in China reached CNY 1.69 trillion, surging 90.78% from the previous month's CNY 885.8 billion. This indicates that the wheels of the economy and business are still rolling so that they dismiss the worries of the economic hard landing. Market participants are also convinced by the rupiah exchange rate after Bank Indonesia (BI) insisted it would maintain the value of the national currency. The rupiah in the current year is still maintained in the green line with a 2% increase. During April, rupiah appreciation was recorded at 1%.