The Weekend Rupiah Potentially Strengthens Driven By National Economic Growth

JAKARTA - The rupiah exchange rate in trading Friday, July 5 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, July 4, 2024, the rupiah exchange rate on the spot market closed up 0.25 percent at the level of Rp. 16,330 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.28 percent to a price level of Rp. 16,341 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said ADP's labor data were weaker than expected and the weak purchase manager's index on non-manufacturing activities increased speculation against the weakening of the US economy, which traders said would encourage the Fed to cut interest rates sooner.

"Weak labor data also prompted speculation of weak nonfarm payroll data on Friday. Traders are raising their stakes that the Fed will cut 25 basis points in September," he said in a statement, quoted Friday, July 5.

According to Ibrahim, the CME Fedwatch tool shows traders expect a chance of lowering interest rates in September to be nearly 66 percent, up from the 59 percent seen a day ago.

However, the minutes of the Fed meeting in June showed that policymakers were still unsure that inflation had fallen to a limit where interest rates could be lowered.

From an internal point of view, economic growth in the second quarter of 2024 is predicted not to be as high as in the first quarter of 2024, only 4.9 percent to 5.1 percent will grow. However, in the current uncertainty due to the heated political tension, this figure is quite good.

The Central Statistics Agency (BPS) noted that the Indonesian economy in the first quarter of 2024 grew by 5.11 percent year on year (yoy). This economic growth increased from the fourth quarter of 2023 which was 5.04 percent yoy, and also increased from the first quarter of 2023 which was 5.04 percent yoy.

Acceleration of economic growth which was quite high in the first quarter of 2024 did not necessarily repeat itself in the following quarters. This is because in the next quarter there will be no momentum for the 2024 general election (Pemilu) and also for Ramadan. The election momentum has increased the government's spending to support the contestation.

In addition, government spending has also increased due to the provision of THR Ramadan for ASN, TNI/Polri, PPPK, and retirees, as well as an increase in salary in early 2024. The realization of government spending in the first quarter of 2024 was recorded to have increased by 18 percent compared to the same period last year or Rp611.9 trillion.

Ibrahim expressed that the main hope that the government can rely on to encourage further economic growth is to rely on commodity exports. This is in line with the economic growth of Indonesia's trading partner countries such as China, which grew better reaching 5.3 percent yoy in the first quarter of 2024.

In addition, commodity export performance is expected to boost Indonesia's economic growth in the second quarter until the third quarter of 2024.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Friday, July 5, 2024, in the price range of IDR 16,280 - IDR 16,400 per US dollar.