Rupiah is Projected to Strengthen Driven by External and Internal Sentiments

JAKARTA - The rupiah exchange rate on Thursday 30 November 2023 is expected to move stronger again.

Moreover, the rupiah has tended to strengthen against the United States (US) dollar in the last few days.

Quoting Bloomberg, on the Rupiah exchange rate on Wednesday 29 November, the spot rupiah exchange rate strengthened 0.26 percent to IDR 15,395 per US dollar.

Meanwhile, the Jisdor rupiah exchange rate strengthened 0.40 percent daily to a price level of IDR 15,387 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi said that Fed officials think the central bank needs to be more careful in keeping interest rates higher for a longer time, and easing inflation could encourage the bank to ease policy earlier than expected.

"High-interest rates have put enough pressure on inflation this year, and a further reduction in price pressures will likely cause banks to start lowering interest rates," he explained in his official statement Thursday, November 30.

According to Ibrahim, traders estimate at least a 40 percent chance that the Fed will lower interest rates by March 2024 at the latest, and the central bank will keep interest rates unchanged in December.

The prospect of a change in the Fed's hawkish stance prompted strong gains in gold throughout November, with the yellow metal now expected to add more than 3 percent on the month.

Additionally, concerns about China's sluggish economy remain, especially after a series of weak economic data in October.

Ibrahim said this week's focus is on purchasing managers' index (PMI) data for November, which will be released on Thursday. The figures are expected to show a sustained decline in manufacturing activity, highlighting the continued weakness of China's biggest economic engine.

Internally, Indonesia's government debt will rise again to IDR 7,950.52 trillion in October 2023.

At the end of October 2023, there was an increase of IDR 58.6 trillion from the September 2023 period (month to month/mtm) which was recorded at IDR 7,891.61 trillion.

Quoted from the November 2023 Edition of Our APBN book, the government debt ratio in October 2023 reached 37.68 percent of gross domestic product (GDP).

Even though the value has increased, the debt ratio as of October 2023 is actually lower than the previous month which was 37.95 to GDP.

The debt ratio is also lower compared to the end of 2022 and is still below the safe limit of 60 percent of GDP in accordance with Law no. 17/2003 concerning State Finance.

This ratio is also still better than what was set at around 40 percent in the 2023-2026 Medium Term Debt Management Strategy.

Furthermore, Ibrahim said, the government always manages debt carefully and measurably by paying attention to currency composition, interest rates, and optimal maturity.

Meanwhile, government debt is dominated by domestic debt with a proportion of 71.78 percent.

This is in line with the general debt financing policy to optimize domestic financing sources and utilize foreign debt as a complement.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Thursday, November 30 in the price range of IDR 15,370- IDR 15,440 per US dollar.