Market Focus Geopolitical Conditions, Rupiah Potentially Weakening

JAKARTA - The rupiah exchange rate in trading Tuesday, June 25, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Monday, June 24, 2024, the rupiah exchange rate on the spot market closed higher by 0.34 percent at the level of Rp. 16,394 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.16 percent to a price level of Rp. 16,431 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said Greenback was motivated by PMI readings that were stronger than expected, sparking fears that US economic resilience would provide room for the Federal Reserve to keep interest rates high.

Ibrahim said the focus this week will also focus on geopoliticals, with the US president's debate, voting in the French elections and PCE price index data the figure is a measure of Fed's choice of inflation and is likely to be a factor in interest rate prospects.

From an internal point of view, Ibrahim conveyed that the strengthening of the rupiah exchange rate was related to a positive market response to the International Monetary Fund (IMF), which reminded the elected president and vice president Prabowo Subianto and Gibran Rakabuming Raka to commit to keeping the fiscal deficit below 3 percent of Gross Domestic Product (GDP).

"IMF sees that Indonesia's fiscal will expand in 2024 and 2025. However, the IMF sees a slightly smaller deficit that will support more balanced growth and policy mix while maintaining policy space to respond to negative risks," he said in his statement, quoted on Tuesday, June 25.

This was also guaranteed by the government, through the Minister of Finance Sri Mulyani Indrawati emphasized that the deficit in the State Revenue and Expenditure Budget (APBN) would still be maintained below 3 percent. This is considered a commitment of the government and will be continued by the elected president Prabowo Subianto.

As is known, the state budget is now a serious concern for investors for fear that the deficit will reach the level of 3 percent of GDP seeing the spending plan being carried out.

Currently, the preparation of the 2025 RAPBN has begun. Regarding the deficit posture designed in the 2025 RAPBN of 2.29 percent-2.82 percent of GDP, Sri Mulyani said, it has taken into account free nutritious meals.

"IMF understands that Indonesia is pursuing an ambitious growth agenda in Indonesia Gold's Vision to achieve high-income country status by 2045," he said.

Ibrahim said this was supported by government spending (including for education, social programs, and infrastructure), institutional reforms (including to improve the labor market, business world, and the private sector), the environment and the financial sector, and industrial policies, which aim to increase the added value of exports in certain sectors.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Tuesday, June 25, 2024, in the price range of IDR 16,380 - IDR 16,450 per US dollar.