The Potentially Weakening Rupiah Driven By The Expertation Of The US Interest Rate Cut

JAKARTA - The rupiah exchange rate in trading Tuesday, December 17, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Monday, December 16, 2024, the rupiah exchange rate on the spot market closed higher by 0.04 percent at the level of Rp. 16,002 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.20 percent to a price level of Rp. 16,019 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi said traders remain vigilant about strengthening the US dollar before this week's Fed meeting.

"The central bank is expected to cut interest rates by 25 basis points at the end of the meeting on Wednesday, so interest rates will drop by a total of 100 bps by 2024," he said in his statement, quoted on Tuesday, December 17.

In addition, Ibrahim said the central bank's interest rate prospects would be closely monitored, especially considering the latest data showing inflation rising in November, while the labor market remains strong.

The Fed is expected to signal more caution over future easing, which could keep interest rates high in the long term.

Meanwhile, from within the country, Indonesia's trade balance surplus continued in November 2024. The Central Statistics Agency (BPS) revealed that the trade balance surplus reached 4.42 billion US dollars in November. This is the 55th surplus in a row.

However, this November surplus was higher than the previous month's 2.48 billion US dollars. This surplus was triggered by a higher export value than imports. Indonesian exports reached 24.01 billion US dollars in November 2024, while imports were recorded at 19.59 billion US dollars. Meanwhile, Indonesian imports decreased by 10.71 percent (mtm) in November 2024.

In addition, the Government has officially imposed an increase in Value Added Tax (VAT) rates to 12 percent starting January 1, 2025. However, a number of goods and services are still exempt from VAT, while several other goods get tariff discount facilities.

Household consumption remains the main support for the Indonesian economy, with a contribution of up to 50 percent. To maintain people's purchasing power, the government provides stimulus, including the exemption of Government Borne VAT (DTP) for the purchase of houses and motorized vehicles.

Then, the government will continue to provide food assistance in the form of 10 kilograms of rice per month to underprivileged communities in deposits I and II. Households with electricity power below 2,200 VA will also receive a 50 percent discount on electricity bills for two months.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Tuesday, December 17, 2024, in the price range of IDR 15,090 - IDR 16,050 per US dollar.