Rupiah Is Predicted To Weaken, This Is The Factor

Illustration (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate on Tuesday 12 December 2023 is expected to weaken due to a decline in market expectations against the Fed's dovish policy.

Quoting Bloomberg, the Rupiah exchange rate on Monday, December 11, the rupiah spot exchange rate slightly strengthened 0.68 percent to Rp15,623 per US dollar.

Meanwhile, Jisdor's rupiah exchange closed down 0.74 percent at the price level of Rp15,614 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi conveyed that the data on nonfarm payroll is stronger than expected to reduce speculation that the Fed could lower interest rates in early 2024.

"The Fed's future price shows a 43 percent chance of a 25-base point decline in March, down from previous expectations of more than 60 percent," he explained in his official statement Tuesday, December 12.

Ibrahim said the central bank would maintain a stable interest rate at the end of Wednesday's two-day meeting. But its prospects for interest rates, especially given the current power of the labor market, will be the focus.

However, strong labor data indicates resilience in the US economy, and marks the potential for soft landing. Apart from the Fed, US inflation data is also available this week.

In addition to the Fed, interest rate decisions from the UK Central Bank (BoE), European Central Bank (ECB), and Swiss National Bank (Switzerland National Bank) will be announced this week, with the three banks likely to signal higher interest rates for a longer period of time.

From within the country, Bank Indonesia (BI) reports that a survey of consumers in November 2023 indicates optimism for strong economic conditions.

This is reflected in the Consumer Confidence Index (IKK) in November 2023 which is at 123.6.

Ibrahim explained in a BI report released Friday (8 December) that the strong consumer confidence in November 2023 was driven by consumer confidence in current economic conditions and expectations of the future economy that remain optimistic.

"Where, the Current Economic Condition Index (IKE) and the Consumer Expectation Index (IEK) in November 2023 were recorded at 113.0 and 134.2, respectively," he explained.

In November 2023, consumer confidence was observed to remain optimistic in all expenditure categories. Increased optimism was mainly recorded in respondents with expenditures of IDR 2.1-3 million.

Then, consumer perceptions of current economic conditions remain strong, as reflected in IKE November 2023 which is in an optimistic area of 113.0, although lower than 114.4 in October 2023.

The strong remaining IKE November 2023 was mainly driven by the Old-Resilient Goods Purchase Index (Durable Goods) which was recorded at 110.2 increasing by 1.0 points from October 2023.

Meanwhile, the Employment Availability Index and the Current Income Index decreased by 4.3 points and 0.8 points to 113.2 and 115.6 in November 2023, respectively.

Ibrahim estimates that the rupiah will fluctuate but closed lower on trading Tuesday, December 12 in the price range of IDR 15,610- IDR 15,670 per US dollar.