US Inflation Data Release Wait Market, Potentially Weakening Rupiah

JAKARTA - The rupiah exchange rate in trading Tuesday, May 21, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Monday, May 20, 2024, the rupiah spot exchange rate closed down 0.14 percent to the level of Rp15,978 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.01 percent to a price level of Rp15,980 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said last week's data showed US consumer prices for April were declining, causing the market to estimate 50 basis points (bps), or at least twice this year's interest rate, but various Fed officials have warned about when interest rates might fall.

Oleh karena itu, Ibrahim menyampaikan para pedagang bet pada pelonggaran sebesar 46 bps pada tahun ini, dan hanya penurunan suku bunga pada bulan November yang sudah diperhitung sepenuhnya.

"The focus now is on the price index report Personal Consumption Expenditure (PCE) for the Fed's choice of inflation which will be released on May 31," he explained in his official statement, quoted Tuesday, May 21.

Ibrahim said the market would also focus on the minutes of the Fed's last meeting scheduled for Wednesday. The initial PMI for the euro, German, UK and US zones will also be released this week, along with a complete list of Fed speakers.

From an internal perspective, Economists estimate that Indonesia's current account deficit (CAD) will widen in the first quarter of 2024. This condition has the opportunity to occur in line with the shrinking trade balance surplus.

Indonesia's current account balance will record a deficit of 0.40 percent of GDP in the first quarter of 2024, which in the first quarter of 2023 experienced a surplus of 0.90 percent of GDP.

This also shows a widening of the 0.38 percent deficit from GDP in the fourth quarter of 2023. The widening of the current account deficit was mainly influenced by the trade balance surplus which decreased from 12.11 billion US dollars in January-March 2023 to 7.41 billion US dollars in January-March 2024.

Meanwhile, Indonesia's current account deficit in the fourth quarter of 2023, which increased slightly compared to the previous quarter, is still supported by an increasing balance surplus in the trade balance of goods.

Based on Bank Indonesia (BI) records, this condition is supported by an increase in exports of goods in line with improvements in global demand and commodity prices.

On the other hand, imports of goods increased in line with the increasing needs of the community during the Christmas and New Year periods. Meanwhile, the service balance deficit and the primary income balance were recorded to be higher, in line with the increase in domestic activity and the pattern of interest payments in the reporting period.

As for 2023, current transactions recorded a deficit of 1.6 billion US dollars or 0.1 percent of GDP, after posting a surplus of 13.2 billion US dollars or 1.0 percent of GDP in 2022. The current account deficit will remain under control in 2024, to 0.75 percent of GDP.

These expectations are driven by several factors, including gradual normalization of commodity prices, as well as solid domestic demand in line with positive domestic economic prospects.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Tuesday, May 21, 2024, in the price range of IDR 15,960 - IDR 16,030 per US dollar.