US Economic Data Wait Market, Rupiah Movement Potentially Strengthens

JAKARTA - The rupiah exchange rate in trading Friday, April 26, 2024 is expected to continue strengthening the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, April 25, 2024, the rupiah spot exchange rate closed down 0.20 percent to the level of Rp. 16,188 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed lower by 0.29 percent to a price level of Rp. 16,208 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said Greenback remains near its highest level, as traders continue to ignore expectations of an early drop in interest rates by the Federal Reserve.

Ibrahim conveyed that the economic data released this week was set to provide more signs on the interest rate line. Data on first-quarter US gross domestic product that will be released on Thursday is expected to show whether the world's largest economy remains resilient in early 2024.

"What is more supervised is the PCE price index data on the Fed's choice of inflation which will be released on Friday," he explained in his official statement, quoted Friday, April 26.

According to Ibrahim, PCE's price index data, which is a measure of the Federal Reserve's choice of inflation, is likely to have a greater impact, given that the data is directly related to the central bank's prospects for interest rates.

From an internal point of view, the change in the direction of US monetary policy and the deteriorating geopolitical tensions in the Middle East and Europe have made the dynamics of the global financial economy change rapidly with increased risks and uncertainties.

The high inflation and strong economic growth of the United States (US) are pushing for speculation of a smaller and longer Fed Funds Rate (FFR) decline than the (high for longer) forecast in line with statements by Federal Reserve System officials.

As a result, global investors are moving their portfolios to safer assets, especially US dollars and gold currencies, causing capital escape and weakening exchange rates in developing countries to grow even greater.

This condition requires a strong policy response to mitigate the negative impact of this global uncertainty on the economy in developing countries, including in Indonesia.

As is known, BI in April 2024 decided to raise the benchmark interest rate or BI Rate by 25 bps or to 6.25 percent. Meanwhile, the Deposit Facility and Lending Facility interest rates also increased by 25 bps, each to 5.5 percent and 7 percent.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Friday, April 26, 2024, in the price range of IDR 16,150 - IDR 16,220 per US dollar.