Rupiah Potentially Weakens While Waiting for US Economic Data

JAKARTA - The rupiah exchange rate on Monday, July 22, 2024, is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the rupiah exchange rate on Friday, July 19, 2024, the rupiah exchange rate on the spot market closed down 0.22 percent at IDR 16,191 per US dollar. Meanwhile, the rupiah exchange rate at the Jakarta Interbank Spot Dollar Rate (Jisdor) Bank Indonesia (BI) closed down 0.27 percent to IDR 16,199 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi conveyed increasing optimism about the interest rate cut in the US, with traders estimating a more than 90 percent chance that the Federal Reserve will cut interest rates by 25 basis points in September.

"While these bets remain, the dollar found strength this week from unexpectedly strong jobless claims data, which showed the labor market that is a key consideration for the Fed to start lowering interest rates remains resilient," he said in his statement, quoted Monday, July 22.

Ibrahim said the European Central Bank (ECB) maintained its policy interest rate at 4.25 percent at its July 2024 meeting.

At the meeting, ECB President Christine Lagarde said that the decision to cut the policy interest rate in September 2024 was wide open, hinting at the possibility of another rate cut in 2024.

Ibrahim said media reports this week indicated that the US was considering tighter trade restrictions on China, especially the country's technology and chipmaking sectors.

"The report raises concerns about a new trade war between Beijing and Washington, given that trade relations between the two are already tense," he explained.

Internally, the Government is optimistic that it will be able to take advantage of export opportunities and maintain a trade surplus trend through various strategies amidst Indonesia's weakening trade performance.

The Central Statistics Agency (BPS) reported that trade performance in the first semester of 2024 recorded a surplus of 15.45 billion US dollars or 4.46 billion US dollars lower than the same period last year.

The achievement in the first six months of this year did not reach 50 percent of the total target throughout 2024 at the lower limit of 31.6 billion US dollars, while the upper limit was 53.4 billion US dollars. This means that Indonesia must work hard to achieve the trade balance surplus target of 31.6 billion US dollars - 53.4 billion US dollars in the second semester of 2024.

Therefore, the government has prepared a number of strategies to encourage increased trade performance in the second semester of 2024. One of them is strengthening the transformation of the export structure towards increasing exports of manufactured products, expanding export markets to ASEAN, South Asia, the Middle East, Africa, and Latin America.

In addition, the government is also committed to completing the Comprehensive Economic Partnership Agreement (CEPA) and Free Trade Agreement (FTA) trade agreements that have not been completed. Then, increasing exports with a primary focus on reducing tariffs, paying special attention to countries that function as regional hubs, strengthening the role of foreign trade representatives, and digitalizing trade.

The government will also focus on developing the service trade sector which has great potential. Achieving the national export target certainly emphasizes the importance of efforts and cooperation from all parties.

Ibrahim estimates that the rupiah will fluctuate but close lower on Monday, July 22, 2024, in the price range of IDR 16,180 - IDR 16,240 per US dollar.