Rupiah Potentially Continues Weakening Driven By External Sentiment

JAKARTA - The rupiah exchange rate in trading 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 the level of Rp. 15,495 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed lower by 0.36 percent to a price level of IDR 15,429 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi submitted a very strong work data report for September causing traders to cut bets that the Federal Reserve will cut interest rates by 50 basis points further.

"Economic data are improving and more aggressive comments from Fed Chair Jerome Powell on Monday, when he rejected expectations of a large and sustainable cut in interest rates, led traders to reduce betting on a 50-base 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 lost after Friday's data. Traders now expect no chance of cutting interest rates by 50 basis points, down from about 31 percent previously on Friday and 53 percent a week ago, according to CME Group's FedWatch Tool.

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

From a domestic perspective, Bank Indonesia (BI) posted a foreign exchange reserves (cadev) position at the end of September 2024 worth 149.9 billion US dollars, down slightly after last month setting a record high since December 2023.

This position was recorded to be lower than foreign exchange reserves at the end of August 2024 which was valued at 150.2 billion US dollars.

This position is realtively stable and slightly decreased due to the government's obligation to pay off debt.

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

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

In the future, Bank Indonesia views foreign exchange reserves as adequate so as to support the resilience of the external sector.

Through export prospects that remain positive, the balance of capital and financial transactions that is predicted to continue to record a surplus is in line with investor positive perceptions of the national economic outlook and attractive investment returns, supporting maintained 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 Business reports, foreign exchange reserves are assets owned by the central bank or monetary authority to fulfill financial obligations due to international transactions.

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