Rupiah Potentially Weakens Due To Concerns Over The US And Chinese Trade Wars

JAKARTA - The rupiah exchange rate in trading Friday, July 19, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, July 18, 2024, the rupiah exchange rate on the spot market closed down 0.34 percent at the level of Rp. 16,155 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.19 percent to a price level of Rp. 16,160 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said top officials of the US central bank or Federal Reserve (The Fed) said that the Fed is closer to cutting interest rates given the improving inflation trajectory and labor markets in a better balance.

"The threat of US restrictions on China raises concerns over the new trade war between countries. Recent comments by Republican presidential candidate Donald Trump regarding US defense spending in Taiwan have also made sentiment towards the regional market uneasy," he said in a statement, quoted Friday, July 19.

Ibrahim said such a move could represent the Biden administration's ongoing efforts to cut off China's access to advances in artificial intelligence towards chip-making technology and industry.

Therefore, it can also trigger harsh retaliation from Beijing, triggering a new trade war between countries and the world's largest economies.

From an internal point of view, Bank Indonesia (BI) estimates that Indonesia's economic growth throughout 2024 will be able to be in the range of 4.7 percent to 5.5 percent thanks to the performance of the domestic economy. Household consumption and investment boost the performance of gross domestic product (GDP) in the second quarter of 2024.

Exports of rising goods are driven by an increase in exports of manufactured and mining products, especially metals and metal ore as well as steel, to major trading partner countries such as India and China.

Economic growth in the third and fourth quarters is also expected to remain good. This positive projection was also driven by plans to increase fiscal stimulus from 2.3 percent to 2.7 percent of GDP and export performance which increased with the increase in demand from major trading partners.

BI stated that it will continue to strengthen the synergy between fiscal stimulus by the Government and macroprudential stimulus by BI. That way, economic growth can be encouraged to remain sustainable, especially in terms of demand.

BI also continues to strengthen policy coordination with the Government to mitigate the impact of the high risk of global uncertainty. Policy coordination with the Government (Center and Regions) was pursued through the National Movement for Food Inflation Control (GNPIP) program in various regions in the Central and Regional Inflation Control Team (TPIP and TPID).

Ibrahim estimates that the rupiah will fluctuate but close lower on trading Friday, July 19, 2024, in the price range of Rp. 16,140 - Rp. 16,200 per US dollar.