Rupiah Projected to Weaken, Market Watches Fed Policy

JAKARTA - The rupiah exchange rate on Thursday, February 5, 2026 is expected to weaken against the US dollar.

To note, quoting Bloomberg, on Wednesday, February 4, 2026, the spot rupiah exchange rate closed down 0.14 percent to Rp16,777 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of the Bank Indonesia (BI) closed up slightly 0.01 percent to the price level of Rp16,775 per US dollar.

Money market observer Ibrahim Assuaibi, assessed that the strengthening of data on the US manufacturing sector had strengthened market confidence that The Federal Reserve still had room to be more patient before easing its monetary policy again.

"The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) jumped to 52.6 in January (2026) from 47.9 in December (2025), far exceeding market expectations of 48.5, while the S&P Global Manufacturing PMI slightly increased to 52.4 from 51.9," he said in a statement. , quoted Thursday, February 5.

Furthermore, Ibrahim said that market participants began to lower expectations for a Fed rate cut, in line with the US central bank's decision to maintain interest rates at the January meeting and President Donald Trump's appointment of Warsh.

He added that currently, the financial market estimates the Fed's interest rate cut in the upcoming June meeting at around 66 percent, based on data from the CME FedWatch Tool.

"The market focus today is the ADP Employment Change report," he said.

Meanwhile, from within the country, Ibrahim highlighted the World Bank's view that Indonesia has the potential to be difficult to escape from the middle income trap if it does not carry out deeper structural reforms, especially in improving the business and investment climate.

He added that although Indonesia has made progress and shown relatively good economic performance, fundamental challenges still loom, especially related to the quality of the business environment.

"This issue is very crucial because Indonesia, like other countries at the same income level, must switch to a new growth engine," he said.

According to him, the growth model that has been driving the national economy is no longer considered sufficient to bring Indonesia to the high-income country category.

In the future, Ibrahim said that the engine of economic growth is expected to be more endogenous, with a focus on increasing productivity and expanding markets abroad to accelerate development and innovation.

"Based on the World Bank's analysis of company data and big data in Indonesia, it was found that the ecosystem of large companies in Indonesia is less dynamic and less productive compared to other countries with a similar economic size but higher income," he said.

In addition, he added that the increase in the scale of the company's business was not accompanied by productivity growth and this finding confirms the importance of improving the business competition climate, not only from the regulatory side, but also in the enforcement of the principle of equal opportunity to try (level playing field) consistently.

"This condition also has an impact on the financial sector, as well as the service market and the processing industry," he said.

Ibrahim estimates that the rupiah will move fluctuatio but will close weaker on Thursday, February 5, 2026 in the price range of IDR 16,770 - IDR 16,800 per US dollar.