US Payrolls Nonfarm Data Wait Market, Rupiah Potentially Strengthens

JAKARTA - The rupiah exchange rate in trading Monday, July 8, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Friday, July 5, 2024, the rupiah exchange rate on the spot market closed higher by 0.32 percent at the level of Rp. 16,278 per US dollar.

Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.18 percent to a price level of IDR 16,312 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi said the dollar index and dollar index futures have fallen to a three-week low in quiet trading due to holidays, while increasing expectations of lower interest rates have also weakened greenback.

"The current focus is on the main data for non-farm payroll, which will be released on Friday, to get further instructions regarding interest rates," he said in his statement, quoted Monday, July 8.

According to Ibrahim, the CME Fedwatch tool shows traders expect more than 66 percent of the Federal Reserve to lower interest rates by 25 basis points in September.

But optimism for the decline in interest rates has been somewhat clouded by a hawkish signal from the Fed, with minutes of the bank meeting in June showing policymakers still skeptical of lower interest rates.

In addition, nonfarm payroll data will also provide more definite signal regarding the labor market, which is also a major debate for the Fed in lowering interest rates.

From an internal point of view, Bank Indonesia (BI) noted that Indonesia's foreign exchange reserves had increased. At the end of June 2024, reserves recorded 140.2 billion US dollars, an increase compared to the position at the end of May 2024 of 139.0 billion US dollars.

The increase in the position of foreign exchange reserves was influenced by tax and service revenues as well as the withdrawal of government foreign loans, amid the need for stabilization of the rupiah exchange rate in line with the high uncertainty of the global financial market.

Meanwhile, the position of foreign exchange reserves at the end of June 2024 is equivalent to financing 6.3 months of imports or 6.1 months of imports and payment of government foreign debt, and is above the international adequacy standard of around 3 months of imports.

BI assesses that the foreign exchange reserves are able to support the resilience of the external sector and maintain macroeconomic and financial system stability, and continue to strengthen synergies with the Government in strengthening external resilience so that it can maintain economic stability in order to support sustainable economic growth.

In the future, BI views foreign exchange reserves as adequate so that they can continue to support the resilience of the external sector.

For export prospects that remain positive and the balance of capital and financial transactions that are predicted to continue to record a surplus, it is in line with investor positive perceptions of the national economic outlook and attractive investment returns, supporting maintained external resilience.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Monday, July 8, 2024, in the price range of Rp. 16,220-Rp. 16,320 per US dollar.