The Rupiah failed to strengthen in early 2022. Apart from strengthening US bond yields, concerns over Omicron also contributed to the pressure on the Rupiah.
Welcoming the beginning of 2022, the Rupiah has not yet succeeded in showing a strengthening versus the US Dollar. Even in the first two trading days of the year, the currency remained stuck in the red zone. At the time of writing on Wednesday (05/January), USD/IDR was trading at around 14361.5, strengthening up to 0.39%.
According to several experts, one of the main reasons for the rupiah's sinking is the sharp increase in US bond yields, which supports the strengthening of the Dollar Index. This movement is a sign that market players are starting to anticipate an increase in US interest rates this year. Market observer Ariston Tjendra said that the Rupiah still has the potential to continue weakening from its current position.
"The rupiah exchange rate still has the potential to weaken against the US dollar today because the market is still anticipating an increase in the benchmark interest rate of the US central bank in 2022," said Ariston Tjendra, quoted by Antara.
Ariston said that the Fed's plan to increase interest rates would most likely occur in June 2022. However, the development of high inflation in the US made many market participants speculate that the Fed will start raising interest rates in March 2022.
Omicron still wary of the market
In addition to the increase in US bond yields, the Rupiah is still not completely free from the threat of the Omicron variant which has now entered the country.
"... From within the country, the market is also still aware of the development of COVID-19 cases, especially the Omicron variant, which has started to increase," said Ariston.
Currently, Omicron cases in Indonesia continue to grow. Spokesperson for the Ministry of Health, Dr. Siti Nadia Tarmizi, said that the total number of Omicron cases was 254 cases. Of all these cases, 239 of them came from international travelers (imported cases). For local transmission, there have been 15 cases recorded so far.
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