Rupiah Potentially Continues Weakening Amid Anticipation Of US Labor Data

JAKARTA - The rupiah exchange rate on Wednesday, December 6, 2023 is expected to weaken again amid strengthening the United States (US) dollar index.

This is due to the decline in optimism of market players regarding cutting the Fed's benchmark interest rate.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, December 5, the rupiah spot exchange rate rose 0.27 percent to Rp15,505 per US dollar. Meanwhile, Jisdor's rupiah exchange rate rose 0.38 percent daily to a price level of Rp15,504 per US dollar.

Director of PT.Laba Forexindo Berjangka Ibrahim Assuaibi said that the weakening of the rupiah was due to the anticipation of the main data for nonfarm payroll in November, which is the main size of the labor market to be released this weekend, making the market somewhat reduce optimism recently over the early decline in interest rates by the Federal Reserve.

"The Fed Fund price futures show traders are now estimating a 49 percent chance that the central bank will cut interest rates as soon as March 2024, down substantially from the 60 percent chance seen early in the week. This uncertainty also helps the dollar recover from its recent lows", he explained in his official statement Wednesday, December 6.

In Asia, a private survey shows that China's service sector activity grew bigger than expected in November, taking place just days after a private survey showed unexpected resilience in the manufacturing sector.

However, optimism for the data is largely offset by growing concerns about a new epidemic in the country, following a surge in respiratory disease in major cities in China.

Local media reports say that the National Health Commission, which is the heart of the country's anti-COVID crackdown, is considering restrictions on social gatherings.

Domestically, economists predict the Price Index of The Organization for Economic Co-operation and Development (OECD) will revise Indonesia's economic growth projection to 4.9 percent by 2023.

Economists have revealed that the projections are in line with reports from the OECD.

On November 29, 2023, OECD in its latest report reported that Indonesia's economic growth in 2023 increased, from the previous 4.7 percent now projected to 4.9 percent.

As for projections in 2024, OECD will also increase its projection from 5.1 percent to 5.2 percent for next year.

By 2025, it is also projected to be 5.2 percent.

In its report, the organization also said that Indonesia will maintain fast and stable economic growth. Performance is also supported by better labor market conditions and lower inflation.

Then, investor sentiment is also projected to support consumption and investment.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Wednesday, December 6 in the price range of IDR 15,480- IDR 15,550 per US dollar.