Rupiah Projected Weakening Driven By Global Geopolitical Conflict Tensions

JAKARTA - The rupiah exchange rate in trading Thursday, November 21, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, November 20, 2024, the rupiah exchange rate on the spot market closed down 0.16 percent at the level of Rp15,871 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.26 percent to a price level of Rp15,858 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi said the tension of the geopolitical conflict became the focus after Moscow's nuclear threat increased between Russia and Ukraine.

"Moscow lowered the nuclear retaliation threshold for Ukraine's attacks in response to the US which reportedly allowed the use of long-range missiles by Ukraine against Russia, which Moscow warned could mark a dire escalation of the conflict," he said in a statement, quoted Thursday, November 21.

However, Russian Foreign Minister Sergei Lavrov said his country would do everything it could to avoid a nuclear war. But hostilities with Ukraine continued, as the two countries launched attacks that weakened each other over the past week.

In addition, Ibrahim said the market remains unsure about what will happen to the US economy and interest rate under Donald Trump, amid some doubts about whether the Federal Reserve will cut interest rates in December.

Meanwhile, from within the country, Bank Indonesia (BI) decided to hold the benchmark interest rate or BI-Rate at the level of 6 percent at the BI 19-20 September 2024 Board of Governors Meeting (RDG).

As for the RDG the previous month, BI also maintained the BI rate at the level of 6 percent, not only the benchmark interest rate, but the deposit facility interest rate was also maintained at the level of 5.25 percent, and the lending facility interest rate was maintained at the level of 6.75 percent.

The decision to maintain the BI rate of 6 percent is consistent with the direction of monetary policy to ensure that inflation remains under control in the target of 2.5 percent plus minus 1 percent in 2024 and 2025.

As for this, it is useful to support sustainable economic growth, so the focus of monetary policy is directed to strengthen the stability of the rupiah exchange rate due to increasing geopolitical uncertainty and the global economy and political challenges in the United States.

In the future, Bank Indonesia will continue to pay attention to the movement of the rupiah exchange rate, and the prospects for inflation as well as the development of data and dynamics of developing conditions in observing the space for further policy interest rates. Macro-prudential policies and payment systems are also continuously directed to support sustainable economic growth.

loose macroprudential policies continue to be pursued to encourage bank credit/financing to priority sectors for growth and job creation, including MSMEs and the green economy, while still paying attention to the precautionary principle.

Payment system policies are also directed to contribute to growth, particularly in the trade sector and MSMEs, strengthen infrastructure reliability and the industrial structure of payment systems, and expand the acceptance of payment system digitization.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Thursday, November 21, 2024, in the price range of IDR 15,800 - IDR 15,890 per US dollar.