The Rupiah Has Limited Potential to Weaken, These Are the Factors

JAKARTA - The rupiah exchange rate on Monday 4 December 2023 is expected to weaken again to a limited extent after the release of the November Indonesian PMI index which rose to 51.7 and inflation of 2.86 percent.

Quoting Bloomberg, the Rupiah exchange rate on Friday 1 December, the spot rupiah exchange rate strengthened 0.16 percent to IDR 15,485 per US dollar. Meanwhile, the Jisdor rupiah exchange rate weakened 0.26 percent daily to a price level of IDR 15,524 per US dollar.

PT.Laba Forexindo Berjangka Director Ibrahim Assuaibi said economic data Thursday showed that the Federal Reserve will likely raise interest rates and may start easing in the middle of next year, which is usually a negative factor for the dollar.

"Uncertainty about the Fed's potential policy changes helped the dollar recover sharply from its lowest level since mid-August. Overnight data also showed that the PCE price index, the Fed's preferred inflation gauge, remained above the central bank's target of 2 percent in October," This was explained in his official statement Monday, December 4.

According to Ibrahim, several Fed members noted that this week inflation had fallen significantly, although it was still above the central bank's target range. The dollar also experienced a sharp decline in November, amid growing confidence that the Fed was done raising interest rates.

S&P Global noted that the Indonesian Manufacturing Purchasing Manager's Index (PMI) strengthened to 51.7 in November 2023, or an increase of 0.2 points from 51.5 in October 2023.

Economics Associate Director of S&P Global Market Intelligence Jingyi Pan said, this position shows a faster increase in conditions in the manufacturing sector, this increase in PMI was responded positively by the market.

November PMI data shows that Indonesia's manufacturing sector continues to expand, although the latest headline data of 51.7 is still below the average for the third quarter of 2023, namely 53.2. Meanwhile, the level of business confidence rose compared to the previous month. However, it is still below the long-term average.

According to S&P Global, upcoming new orders for Indonesian-produced goods will increase again in November 2023. This is supported by improving demand conditions and expansion of the customer base.

Nevertheless, S&P Global noted that the growth rate was the slowest in the current 6-month period and was classified as moderate in general, which was triggered by a decline in foreign demand this month.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Monday, December 4 in the price range of IDR 15,450- IDR 15,520 per US dollar.