The Rupiah Potentially Strengthens Amid The Fed's Expectation To Be Aggressive In Lowering Interest Rates
JAKARTA - The rupiah exchange rate in trading Wednesday, September 18, 2024 is expected to move higher against the United States (US) dollar.
Quoting Bloomberg, the Rupiah exchange rate on Tuesday, September 17, 2024, the rupiah exchange rate on the spot market closed up 0.44 percent at the level of Rp. 15,335 per US dollar.
Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.43 percent to a price level of IDR 15,338 per US dollar.
Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the Fed was widely expected to announce at least 25 basis points in interest rates by the end of a September policy meeting on Wednesday.
"However, reports by the Wall Street Journal and Financial Times last week sparked speculation among traders that the central bank could provide a more aggressive cut of 50 bp," he said in his statement, quoted Wednesday, September 18.
Ibrahim said the market had an estimated 61 percent chance of cutting by 50 bp, up from about 15 percent last week.
The US Treasury yields have fallen ahead of the much-anticipated Fed meeting, especially as opportunities for a half-point cut in interest rates are getting bigger.
According to Ibrahim, the Fed is widely expected to signal the start of this week's easing cycle, which could cause interest rates to drop by more than 100 bps by the end of the year.
"The benchmark yield of 10 years decreased by 30 basis points in about two weeks. The two-year yield, which is closer to monetary policy expectations, fell by 2.5 basis points to 3.5509 percent and fell from about 3.94 percent two weeks ago," he said.
From the domestic side, Indonesia's trade balance has again experienced a surplus as of August 2024 while recording a surplus of 52 consecutive months.
It was recorded that Indonesia's trade balance with other countries made a surplus of US$2.9 billion in trade and services in August 2024, in line with the increase in exports and imports slowing down.
The NPI surplus is supported by non-oil and gas commodities, namely mineral fuel or HS 27, vegetable animal fats and oils (HS 15), and Iron and Steel (HS 72).
Indonesia's non-oil and gas exports in August 2024 were recorded at 22.36 billion US dollars, an increase of 7.43 percent compared to July 2024.
This increase was mainly supported by the increase in exports of vegetable fat and oil products, metal seeds, and terak and ash.
Previously, economists in a poll predicted the Indonesia Trade Balance or trade balance to record a surplus worth US$1.9 billion in August 2024, in line with the increase in exports as imports slowed down. If the forecast does occur, then this indicates the continued surplus trend to 52 consecutive months.
Overall, Indonesia's exports in August reached 23.56 billion US dollars, an increase of 5.79 percent from the previous month. However, the oil and gas sector recorded a decline, while non-oil and gas experienced significant growth.
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This achievement is in the midst of major market conditions, such as Japan and the United States in the condition of the Manufacturing Index (PMI) experiencing contraction.
At the same time, several commodities experienced price declines, especially in the energy, agriculture and mineral metal sectors.
However, precious metals, particularly gold, recorded a significant price increase.
Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Wednesday, September 18, 2024, in the price range of IDR 15,230 - IDR 15,350 per US dollar.