After the Election, the Rupiah is Expected to Weaken

JAKARTA - The rupiah exchange rate in trading on Thursday 15 February 2024 is expected to fluctuate again but will close lower against the United States (US) dollar.

Quoting Bloomberg, on the Rupiah exchange rate on Tuesday, February 13, the spot rupiah exchange rate closed down 0.06 percent at IDR 15,604 per US dollar.

Meanwhile, the Jisdor rupiah exchange rate closed up 0.17 percent to a price level of IDR 15,585 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi delivered the Consumer Expectations Survey for January, which showed inflation one year and five years from now had not changed at 3 percent and 2.5 percent respectively.

Meanwhile, the projected increase in inflation three years from now fell to 2.4 percent, the lowest since March 2020, from 2.6 percent in December.

Ibrahim said a Reuters poll said retail sales for January would be released on Thursday, with economists expecting a 0.1 percent decline for January, from a 0.6 percent rise in December.

"Changes in expectations regarding when and how quickly the central bank will reduce interest rates in line with falling inflation are a significant driver of the current currency market," he explained in his statement quoted Thursday, February 15.

A decline in strong employment data this month has largely ruled out the possibility of a Fed rate cut in March, and markets see a move in May as more likely.

Elsewhere, there is a wealth of data released this week in the UK, including inflation and gross domestic product (GDP) figures, expected to be released on Wednesday, which will also likely influence opinion on when the Bank of England will start lowering interest rates. Currently, it looks like it is lagging behind the Fed and ECB.

From an internal perspective, Ibrahim sees that the democratic party will have an influence on economic conditions.

Election and presidential election sentiment is expected to color financial market movements, especially the Garuda currency.

"Moreover, this presidential election is very important considering that around 204.81 million Indonesian citizens who are registered to vote will determine who the next president of Indonesia will be," he explained.

This tight competition is expected to greatly influence the pace of the domestic financial market this week.

The holding of one or two rounds of the presidential election will affect investment sentiment, especially from foreign investors.

The reason is, there is no clarity regarding the policies that will be taken in the future.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Thursday, February 15 in the price range of IDR 15,580- IDR 15,670 per US dollar.