Rupiah is Potentially Continue to Weakening Driven by External Sentiment

JAKARTA - The rupiah exchange rate on Tuesday, October 8, 2024, is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the rupiah exchange rate on Monday, October 7, 2024, the rupiah exchange rate on the spot market closed down 0.66 percent at IDR 15,495 per US dollar.

Meanwhile, the rupiah exchange rate at the Jakarta Interbank Spot Dollar Rate (Jisdor) Bank Indonesia (BI) closed down 0.36 percent to IDR 15,429 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi said that the very strong jobs data report for September caused traders to cut bets that the Federal Reserve would cut interest rates by a further 50 basis points.

"Improving economic data and more aggressive comments from Fed Chair Jerome Powell on Monday, when he rejected expectations of a large and sustained interest rate cut, caused traders to reduce bets on a 50 basis point reduction at the next Fed meeting, on November 6-7," he said in his statement, quoted Tuesday, October 8.

In addition, Ibrahim said the opportunity was completely gone after Friday's data. Traders now see no chance of a 50 basis point rate cut, down from around 31 percent earlier on Friday and 53 percent a week ago, according to the CME Group's FedWatch Tool.

On the other hand, a 25 basis point cut is considered almost certain, with traders also seeing a small chance that the Fed will leave rates unchanged.

On the domestic side, Bank Indonesia (BI) recorded a foreign exchange reserve position (cadev) at the end of September 2024 of USD 149.9 billion, down slightly after last month's highest record since December 2023.

The position was recorded lower than the foreign exchange reserves at the end of August 2024 which were worth USD 150.2 billion.

The position was relatively stable and fell slightly due to the government's obligations in debt payments.

The development of foreign exchange reserves was influenced by, among other things, the government's foreign debt payments. Meanwhile, the foreign exchange reserves position at the end of September 2024 was equivalent to financing 6.6 months of imports or 6.4 months of imports and government foreign debt payments, and was above the international adequacy standard of around 3 months of imports.

Bank Indonesia assessed that the foreign exchange reserves were able to support the resilience of the external sector and maintain macroeconomic and financial system stability.

Going forward, Bank Indonesia views foreign exchange reserves as remaining adequate to support the resilience of the external sector.

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

On the other hand, Bank Indonesia also continues to strengthen synergy with the Government in strengthening external resilience so that it can maintain economic stability in order to support sustainable economic growth.

Based on previous Bisnis news, foreign exchange reserves are assets owned by the central bank or monetary authority to meet financial obligations due to international transactions.

Ibrahim estimates that the rupiah will fluctuate but close lower on Tuesday, October 8, 2024, in the price range of IDR 15,670 - IDR 15,780 per US dollar.