Monday's Rupiah Has the Potential to Weaken, Here's the Cause

JAKARTA - The rupiah exchange rate on Monday 18 March 2024 trading is expected to weaken again against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Friday 15 March, the spot rupiah exchange rate closed down 0.12 percent at IDR 15,599 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) Bank Indonesia (BI) rupiah exchange rate closed down 0.26 percent to a price level of IDR 15,624 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi said the producer price index data was stronger than expected for February. The figures came after stronger-than-expected consumer price index data released earlier this week, which also showed inflation drifting further away from the Federal Reserve's annual target of 2 percent.

"The higher inflation figures occurred just before the Fed meeting next week, where the central bank is expected to keep interest rates unchanged," he said in a statement quoted Monday, March 18.

According to Ibrahim, the Fed now has the potential to offer a more hawkish stance on interest rates, given that it has repeatedly signaled that any rate cuts in 2024 will largely be determined by the path of inflation.

Traders were seen trimming their expectations for a rate cut in June and raising their expectations for a rate cut, according to the CME Fedwatch tool. The prospect of rising long-term interest rates weighs on Asian currencies across the board.

Next week, the central bank is expected to end its policy of controlling negative interest rates and the yield curve in the coming months, with analysts divided on whether the decision will be taken in March or April.

Internally, the Central Statistics Agency (BPS) reported that Indonesia's trade balance in February experienced a surplus of 0.87 billion US dollars. Meanwhile, cumulatively, the trade balance reached 2.87 billion US dollars. Even though there was a surplus, the NPI decreased by 6.42 billion US dollars compared to the same period January-February 2023.

Meanwhile, Indonesia's trade balance surplus in February 2024 mainly came from the non-oil and gas sector of USD 2.63 billion, but was reduced by a deficit in the oil and gas sector of USD 1.76 billion.

Meanwhile, the value of national exports in February 2024 decreased compared to the previous month. Indonesia's exports fell to 19.31 billion US dollars or 5.79 percent (month-to-month/mtm) compared to January 2024. Oil and gas exports were recorded at 1.22 billion US dollars or down 12.93 percent, and the value of non-oil and gas exports fell 5.72 percent to 18.09 billion US dollars.

The decline in exports in February 2024 was driven by a decline in non-oil and gas exports, especially HS 72 iron and steel commodities, contributing to a decline of 3.26 percent.

Furthermore, vegetable animal fats and oils or HS15 contributed a decrease of 2.60 percent, as well as precious metals and gem jewelry HS 71 contributed a decrease of 0.60 percent.

Then, the decline in non-oil and gas exports was driven by a decline in the value of gas exports. It was recorded that this commodity contributed to a decline of 1.58 percent. On an annual basis, the export value in February 2024 decreased by 9.45 percent.

Meanwhile, in the same period, Indonesia's import value in February 2024 reached 18.44 billion US dollars, down 0.29 percent compared to January 2024.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Monday, March 18 in the price range of IDR 15,570 - IDR 15,660 per US dollar.