The rupiah can strengthen in the short term, the long term the US dollar will be strong

ILLUSTRATION. In the short term the rupiah will continue to strengthen. However, in the long term the US dollar has the potential to regain strength, whoever the president is.

Reporter: Danielisa Putriadita | Editor: Khomarul Hidayat

KONTAN.CO.ID – JAKARTA. The rupiah exchange rate will have the upper hand over the US dollar after Joe Biden won the presidential election of the United States (US) defeating Donald Trump. Analysts and economists project that in the short term the rupiah will continue to strengthen. However, in the long term the US dollar has the potential to regain strength, whoever the president is.

The strengthening of the rupiah exchange rate began to occur since market players had expected Biden to be in the US election. Quoting Bloomberg, Friday (6/11) the rupiah strengthened 1.18 percent to Rp 14,210 per US dollar. The middle rate of Bank Indonesia (BI) also recorded that the rupiah strengthened 0.82% to Rp 14,321 per US dollar.

Now Biden is certain to go to the White House. Valbury Asia Futures analyst Lukman Leong said the certainty of Biden’s victory in the US election made the rupiah tend to continue strengthening.

In the short term, Bank Central Asia (BCA) economist David Sumual also projects that the rupiah will continue to strengthen even though the strengthening will no longer be significant. The rupiah could also be supported to strengthen even though Indonesia’s foreign exchange reserves for the October period fell again by US $ 1.5 billion on a monthly basis to US $ 133.7 billion.

“The rupiah is still safe even though foreign exchange reserves have decreased,” said David, Friday (6/11). On the one hand, the movement of the rupiah can still be maintained from data on Indonesia’s economic growth, whose decline was no longer as deep in the third quarter of 2020 as in the previous quarter.

Also Read: Joe Biden wins, rupiah has the opportunity to strengthen again, Monday (9/11)

However, Monex Investindo Futures analyst Faisyal said, in the short term it has the potential to happen bargain hunting. Market participants may return to collecting US dollars because they have fallen deeply. In addition, market players can worry about holding onto the rupiah because data on foreign exchange reserves has decreased and Indonesia is officially in recession.

Meanwhile, the position of the US dollar against other currencies such as the Singapore dollar, yen, poundsterling and euro also tends to weaken. Only against the Australian dollar the position of the US dollar on Friday (6/11) strengthened.

Faisyal said, it was commonplace during elections that market players would shun the country’s currency. However, on the one hand, the other currencies are still overshadowed by their respective negative sentiments.

The euro is still overshadowed by the increasing number of Covid-19 cases. Meanwhile, the poundsterling could still be depressed again due to the uncertainty of the Brexit sentiment.

The continuation of the weakening of the US dollar in the future will depend on conditions after the US election is over. Meanwhile, the strengthening of the rupiah in the short term is no longer significant because market players have priced in.

On the other hand, if the US political situation becomes chaotic after the election, the movement of the major currencies and the rupiah could reverse to weaken against the US dollar.

You see, currently Trump still does not accept his defeat and is adamant about carrying out a campaign to enforce the US Election Law to court.

However, in the long term, Faisyal still sees the US dollar as attractive to buy, even though it is currently weakening. “Whoever wins to become US president, the US dollar will rise again,” said Faisyal.

Don’t forget, Biden certainly has a different policy from Trump, which in turn can strengthen the US dollar again. As a result, Faisyal saw this opportunity for market players to buy US dollars when prices dropped.

Samuel Sekuritas economist Ahmad Mikail Zaini said that the future volatility of the rupiah will come from the alignment of market expectations for Biden with the reality that will happen.

“Is the stimulus really bigger, maybe it is still stuck in the senate in the future, not to mention if Trump continues to protest,” Mikail said. However, if US political conditions remain conducive, optimism can be created. Mikail projects that the rupiah has the potential to be stable at Rp. 14,200 per US dollar by the end of the year.