Jakarta, CNBC Indonesia – The rupiah exchange rate strengthened quite sharply against the United States (US) dollar on Tuesday (1/3) trading even though the war was still raging between Russia and Ukraine. In addition, the good news from China helped the rupiah strengthen this morning.
According to Refinitiv data, as soon as trading was opened, the rupiah immediately shot up 0.24% to Rp. 14,330/US$. The rupiah’s appreciation was then trimmed to Rp 14,350/US$ at 9:07 WIB, or strengthened by only 0.1%.
The development of the war between Russia and Ukraine will continue to be a concern, including the sanctions imposed on Russia.
Russian troops reportedly managed to control two cities in southeastern Ukraine, namely Berdyansk and Enerhodar. Fighting also took place in the second largest city, Kharkiv. While the capital city of Kyiv is said to be still under Ukrainian control.
“The capital Kyiv is still fully controlled by the Ukrainian army and defense,” a government official in Kyiv said.
Although fighting is ongoing, the two sides are also holding meetings in Belarus. There has been no outcome from the meeting, but both sides have said they will resume negotiations.
Meanwhile, the United States and Western countries did not impose sanctions on Russia’s energy industry. But Russia was excluded from the international banking information network known as SWIF (Society for Worldwide Interbank Financial Telecommunication), which is a kind of social networking platform for banks. Through SWIFT, the world’s banks that are members of it can exchange information about the movement of money.
SWIFT has now connected more than 11 thousand financial institutions in more than 200 countries so that financial transactions between countries can be carried out.
If it is true that Russia is cut off from SWIFT, it could have an indirect impact on oil exports, so that global supply could be disrupted.
“The sanctions that Russian banks are receiving are making selling crude oil more difficult,” said John Kilduff, of Again Capital, as reported by CNBC International.
Currently, Brent crude oil is still above US$ 100/barrel. This level has not been touched since 2014, Thursday last week being the first time that Brent oil reached US$ 100/barrel.
It is feared that the increase in crude oil prices will accelerate inflation. As is known, Western countries are currently facing the problem of high inflation. So if it is accelerated, it risks causing the global economy to get into trouble again.
Meanwhile, from within the country, the expansion of the manufacturing sector slowed in February due to a surge in cases of the disease caused by the corona virus (Covid-19).
IHS Markit reports Indonesia’s manufacturing activity as reflected by Purchasing Managers’ Index (PMI) is at 51.2. Down compared to January 2022 which was recorded at 53.7.
The manufacturing PMI uses 50 as the threshold. Above it means expansion, below it means contraction.
“Manufacturing production is still growing, but the pace of growth is slowing due to an increase in positive cases of Covid-19. New businesses, including export-oriented ones, are experiencing a slowdown in sales growth due to the pandemic,” said IHS Markit in a written statement.
As a result of the craze of the pandemic, business confidence in the manufacturing sector fell to its lowest point in 21 months. However, the business world still believes that in time the pandemic will be brought under control so that the economy can be accelerated.
The good news is that business creation in the manufacturing sector continues to grow despite slowing production and sales. The rate of job creation reached its highest point since February 2020. The business world continues to add employees to increase production because they see the prospect of increasing demand.
China also reported its February manufacturing PMI still showing expansion. Data from the Chinese government showed the manufacturing PMI of 50.2, up from 50.1 the previous month and better than economists forecast for a contraction.
Meanwhile, data released by Markit/Caixin showed the figure at 50.4, expanding again after contracting (49.1) in January. The release was also better than economic predictions that forecast to remain 49.1.
The expansion of China’s manufacturing sector is certainly good news, demand for commodities is certainly still maintained which can maintain Indonesia’s trade surplus, and help the current account.
CNBC INDONESIA RESEARCH TEAM
(pap/pap)
–
