Riding the Interest Anomaly

Janet Yellen has brought about a temporary reprieve for the rupiah. Last Wednesday, the Federal Reserve chair, speaking before the US Congress, signaled that the Fed interest rates will not rise in the short term. Investors with rupiah assets were promptly relieved.

Now, there are two factors that are making the rupiah stronger. Other than the Fed interest rate, cheap oil is also helping. In other words, there are fewer US dollars needed to pay for oil and fuel imports than a year ago. On February 11, Bank Indonesia sold one US dollar at only Rp13,436, much cheaper than the Rp13,767 price at the beginning of the month.

February 16, 2016