Rupiah Potentially Weakening, Market Waits For US Payrolls Nonfarm Data Release

JAKARTA - The rupiah exchange rate on the second day of trading in 2024 is expected to weaken against the United States (US) dollar in line with various external data releases.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, January 2, the rupiah spot exchange rate fell 0.46 percent to Rp15,470 per US dollar. Meanwhile, Jisdor's rupiah exchange rate closed lower by 0.21 percent to a price level of Rp15,473 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said that the Nonfarm payroll are waiting for further signs regarding the decline in the Fed Market interest rate now focusing on the main data for non-farm payroll for December, which will be released on Friday.

"This figure is expected to show a further decline in the labor market a trend that is likely to put greater pressure on the Fed to consider lower interest rates," he explained in his official statement, quoted Wednesday, January 3.

In addition, the Fedwatch CME tool shows traders expect a chance of more than 70 percent that the Fed will lower interest rates by 25 basis points in March.

However, before reading in March, the central bank still had to face a series of economic readings, especially regarding inflation and labor markets.

Ibrahim said that although inflation and labor markets decreased substantially throughout 2023, price pressure was still far above the Fed's annual target of 2 percent.

"The office is also relatively hot. Fed officials warned in December that the central bank needs to see more cooling in those two trends to consider cutting interest rates early," he said.

From an internal point of view, the Central Statistics Agency (BPS) noted that Indonesia's inflation in 2023 was 2.61 percent yoy, the inflation rate was the lowest in the last two decades. Sloping inflation in 2023 was driven by good inflation control by the government and Bank Indonesia (BI).

Moreover, in 2023 there will be uncertainty that overshadows the movement of domestic inflation, one of which is the phenomenon of a long drought or El Kalimantan. In addition, inflation in 2023 is low due to high-based factors.

In 2022, there will be an increase in the price of subsidized fuel oil (BBM) that ignites inflation. According to seasonal patterns, usually the inflation rate will decrease one year after the year of the increase in subsidized fuel prices.

In addition, the market also monitors the condition of the 2023 State Revenue and Expenditure Budget (APBN) which recorded a deficit of IDR 241.4 trillion as of December 28, 2023.

Meanwhile, the deficit figure was obtained from the realization of state revenue which reached Rp2,725.4 trillion. Meanwhile, state spending was realized worth Rp2,966.8 trillion.

Meanwhile, the realization of state revenue includes 110 percent of the initial APBN target of IDR 2,463 trillion, or 103.3 percent of the revised target listed in Presidential Decree No. 75/2023 with a figure of IDR 2,637.2 trillion.

Ibrahim estimates that the rupiah will fluctuate but closed lower on Wednesday, January 3 trading in the price range of IDR 15,450- IDR 15,510 per US dollar.