Rupiah Is Expected To Strengthen Driven By Market Expetition

JAKARTA - The rupiah exchange rate in trading Friday, November 29, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, November 28, 2024, the rupiah exchange rate on the spot market closed up 0.40 percent at the level of Rp15,872 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed higher by 0.41 percent to a price level of Rp15,864 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi said investors refrain from placing big bets before the US Thanksgiving holiday, which is likely to continue to be traded thinly over the remainder of this week.

"The price index for personal consumption expenditure (PCE) for the basic inflation preferred by the Federal Reserve has increased according to estimates," he said in his statement, quoted Friday, November 29.

In addition, Ibrahim delivered another reading showing that the US economy developed at a solid pace in the third quarter.

According to him, the inability to achieve the 2 percent Federal Reserve inflation target, combined with a possible increase in import rates, could limit the central bank's ability to lower interest rates next year.

Ibrahim said the reading was accompanied by data on gross domestic products that showed stable growth in the third quarter, as well as data on weekly unemployment claims that were slightly stronger than expected.

"Although the reading did not hinder much expectations for lower interest rates in December, traders seem increasingly unsure about the prospects for interest rates by 2025," he said.

Meanwhile, from within the country, the Organization for Economic Cooperation and Development (OECD) projects that the Indonesian economy will grow 5.2 percent in 2025 compared to the projected growth of 5.1 percent in 2024.

Meanwhile, the government targets economic growth at the level of 5.2 percent on the basic macro assumptions in the 2024 and 2025 state budget (APBN).

OECD assesses that consumption will remain strong and private investment is likely to increase. The fiscal deficit will widen slightly because public spending for the capital city of Nusantara, but is projected to remain below the 3 percent limit. Bank Indonesia is expected to continue to lower interest rates by the end of 2024 and 2025.

On the other hand, OECD reports there are at least three things that could cause major changes in the projection.

First, a new spike in food and energy prices has the potential to cause higher cost of living and subsidized fiscal burdens, so OECD recommends reforms from subsidies to be more targeted.

Second, changes in investor interest in risk in developing countries have the potential to cause an increase in interest rates and cause currency outflows.

Thus, OECD recommends maintaining careful lending with adequate coverage ratios; maintaining the level of currency reserves.

Third, natural disasters. OECD assesses that Indonesia is a country prone to natural disasters, such as extreme weather, volcanic activity and earthquakes, which can cause large fiscal, economic and social costs.

Thus, OECD recommends combining the climate into financial stress tests and land planning regulations as well as increasing insurance coverage.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Friday, November 29, 2024, in the price range of IDR 15,810 - IDR 16,890 per US dollar.