Today's Rupiah Movement Potentially Weakening, Investors Focus On Monitoring Middle East Conflict Conditions

JAKARTA - The rupiah exchange rate in trading Wednesday, April 17, 2024 is expected to continue to weaken the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, April 16, 2024, the rupiah spot exchange closed lower by 2.07 percent to the level of Rp. 16,175 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 1.87 percent to a price level of Rp. 16,176 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said Greenback was strong because inflation was still stagnant and strong growth caused investors to delay expectations regarding when the Federal Reserve might start lowering interest rates.

"The US central bank is now also forecasting to cut less than before. Traders are now estimating less than twice the 25-base point cut by the end of the year, having previously estimated three cuts," he explained in his official statement, quoted Wednesday, April 17.

Ibrahim said investors are also focused on increasing tensions in the Middle East, which is seen as an increase in demand for the US dollar safe haven.

Meanwhile, Israel faced growing pressure from its allies on Monday to show self-control and avoid an escalation of the conflict in the Middle East as Israel considered how to respond to Iranian missile and drone strikes by the weekend.

One of the reasons for strengthening the dollar index was the strengthening of US economic data, one of which was retail sales data which rose 0.7 percent from last month and February data were revised higher to show sales increased by 0.9 percent, not 0.6 percent as previously reported.

From an internal point of view, the market continues to observe the momentum of Ramadan and Eid is believed to have a positive impact on domestic economic growth of 0.14-0.25 percentage points (ppt). Thus, in the first quarter of 2024, Indonesia's economy has the opportunity to grow in the range of 5.0 - 5.1 percent.

The number of factors that encourage economic growth is the increase in government spending, especially related to social assistance and the implementation of elections.

As is known, state spending until March 15, 2024, rose 18.1 percent yoy. In addition, there was a low-base effect from the first quarter of 2023 because the longest period of Ramadan shifted from April last year (second quarter) to March this year (first quarter).

However, inflation is in an increasing trend caused by rising food prices. This can be an obstacle for economic growth in the first quarter of 2024 because it can disrupt people's purchasing power.

In addition, Bank Indonesia continues to mix economic strategies to stabilize the rupiah exchange rate and continue to carry out major interventions in foreign exchange markets, bonds in the Domestic Non Deliverable Forwade (DNDF) trade, although later it will have an impact on decreasing foreign exchange reserves.

Ibrahim said that what BI did was in accordance with regulations aimed at containing the weakening of the rupiah currency, as a result of the global infaction increase.

Ibrahim estimates that the rupiah will fluctuate but closed lower in trading on Wednesday, April 17, 2024, in the price range of IDR 16,160 - IDR 16,250 per US dollar.