Rupiah Potentially Weakening Amid Market Expetitions For The Fed's Interest Rate Reduction

JAKARTA - The rupiah exchange rate in trading Tuesday, September 10, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Monday, September 9, 2024, the rupiah exchange rate on the spot market closed down 0.51 percent at the level of Rp. 15,456 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed lower by 0.48 percent to a price level of IDR 15,446 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said investors had yet to decide on a scale of cutting the Federal Reserve interest rate expected by the end of this month and observe the reading of US inflation this week for further instructions.

"While the US labor data is indeed monitored not in good condition but not as bad as expected," he said in his statement, quoted on Tuesday, September 10.

Ibrahim said that the US unemployment rate on Friday last week was observed to be lower by 4.2 percent compared to the previous period which was at 4.3 percent.

The monthly wage rate rose 0.7 percent from the estimated 0.3 percent increase.

Likewise, on an annual basis, it increased 3.8 percent from the estimated increase of 3.7 percent.

According to Ibrahim, this led to expectations of cutting the US central bank (The Fed) interest rate through the CME FedWatch Tool still high but increasing for cuts by 25 basis points (bps) compared to 50 bps.

"So that the US dollar experienced a rebound and pressure on the rupiah again occurred at the start of trading this week," he said.

From a domestic perspective, a survey of Bank Indonesia (BI) consumers in August 2024 indicated that consumer confidence in economic conditions had increased compared to the previous month.

This is reflected in the Consumer Confidence Index (IKK) in August 2024 of 124.4, higher than 123.4 in the previous month.

The increasing consumer confidence in August 2024 was supported by the Current Economic Condition Index (IKE) which remains optimistic and the Strengthening Consumer Expectation Index (IEK). The current Economic Condition Index (IKE) and the Consumer Expectation Index (IEK) August 2024 were recorded at 114.0 and 134.9, respectively.

IKE, which remains optimistic, is mainly driven by the Current Income Index, which has increased by 1.5 points to 122.9. The Employment Availability Index and the Long-Resilient Goods Purchase Index (Durable Goods) are also maintained in optimistic areas, respectively at 107.6 and 111.5.

Meanwhile, IEK recorded an increase in all components of its formation, especially in the Income Expectation Index.

Consumer expectations of economic conditions in the next six months have been observed to increase.

This is reflected in the IEK August 2024 which is in the optimistic zone increasing by 1.6 points to 134.9.

The strengthening of the IEK is driven by an increase in all components, namely expectations of income, job availability, and business activities, each increasing to 140.0, 132, and 132.6.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Tuesday, September 10, 2024, in the price range of IDR 15,440 to IDR 15,520 per US dollar.