Rupiah Is Predicted To Strengthen Driven By Domestic Sentiment

JAKARTA - The rupiah exchange rate in trading Thursday, January 16, 2025 is expected to move higher against the United States (US) dollar.

To note, citing Bloomberg, on Wednesday, January 15, 2025, the rupiah spot exchange rate closed down 0.34 percent to a level of IDR 16,325 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.28 percent to a price level of IDR 16,311 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said traders were carefully waiting for the report on the consumer price index and had also looked closely at economic data to see if the data supported Fed's cautious attitude towards interest rates.

"The market is now anticipating only one decline in interest rates this year, a sharp adjustment from previous expectations of four declines before the Fed meeting in December, according to Fedwatch," he said in a statement, quoted Thursday, January 16.

Meanwhile, from within the country, there is an increasing global risk, especially from the possibility of a trade war 2.0 and a high-for-longer Fed rate, which will lead to an increase in risk-off sentiment.

Widening the current account deficit or current account deficit, triggering capital outflows, leading to a weakening of the rupiah exchange rate. This will trigger imported inflation.

Therefore, Bank Indonesia lowered the benchmark interest rate of 25 bps to 5.75 percent, the Deposit Facility rate to 5.00 percent and the Lending Facility interest rate to 6.50 percent.

This decision is consistent with the direction of monetary policy to ensure inflation remains under control in the 2.5 percent plus-minus 1 percent target by 2025, as well as to support sustainable economic growth.

In the future, BI will continue to pay attention to the movement of the rupiah exchange rate and the prospects for inflation, as well as the dynamics of developing conditions, in observing the space for further lowering monetary interest rates.

In addition, the Central Statistics Agency noted that Indonesia's trade balance had a surplus of 2.24 billion US dollars in December 2024.

The surplus in December was in line with export projections in December that it would still grow by 7.6 percent year on year (yoy) while imports grew higher to 10.4 percent.

This realization continues the trend of Indonesia's trade balance surplus in the last 56 months.

The surplus trend has been around since May 2020. However, the realization fell by 2.1 billion US dollars compared to last month.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Thursday, January 16, 2025, in the price range of IDR 16,290 - IDR 16,340 per US dollar.