In Last Trade 2023, Rupiah Potentially Strengthens Along With Weakening Of The US Dollar Index

Illustration (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate in the last trade in 2023 is expected to move again higher against the United States (US) dollar in line with the weakening of the US dollar Index due to market focus related to lower interest rates.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, December 28, the rupiah spot exchange rate rose 0.08 percent to Rp15,418 per US dollar.

Meanwhile, Jisdor's rupiah exchange rate closed slightly down 0.01 percent to a price level of IDR 15,416 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the dollar index, which measures the US currency against six of its rivals, fell to a new low in five months at 100.76.

"This index is on a 2.6 percent decline route this year, stopping a strong increase for two consecutive years," he explained in his official statement, quoted Friday, December 29.

In addition, investor focus remains on the time of lowering the Federal Reserve interest rate, with the market forecasting a 88 percent drop in interest rates by March 2024, according to the CME FedWatch.

Futures contracts imply more than 150 base points for the Fed's easing next year.

Ibrahim said that his party still believes that the policy change towards easing in March is too early and there is a potential for an increase in the dollar if and when the action does not materialize.

Although the Fed unexpectedly took a dovish stance at a meeting in December, other major central banks including the European Central Bank (ECB) still maintain their stance on maintaining higher interest rates for a longer period of time.

However, the market still takes into account the reduction in ECB interest rates by 165 basis points next year.

In addition, investors predict the Bank of England will not be able to lower interest rates as much as the Fed and ECB do, given that inflation in the UK is getting higher.

This has widened the gap between British bond yields and the yields of US and European bonds, making them look more attractive.

From an internal point of view, economists are very optimistic about Indonesia's economic growth in 2024, even reaching 5.2 percent.

However, there are also economists who think that economic growth in 2024 has the potential for stagnation, maybe even a little slower, although not big.

According to Ibrahim, the main factor that hinders Indonesia's economic growth is the slowdown in the global economy. This can be seen from the weakening demand for Indonesian exports, especially from China, the United States, Japan, and South Korea, so that the economy does not grow high.

In addition, the domestic factors that influence are the purchasing power of the Indonesian people who are weakened, which is also a factor that hinders economic growth.

Although the government has prepared social assistance for the community to maintain purchasing power, the value of social assistance given to the community is not enough to increase purchasing power.

Therefore, there are several policies that the government needs to implement to achieve the 5 percent economic growth target next year. First, the government needs to strengthen the domestic economy by reducing imports and increasing exports to countries with good economic growth.

Second, the government needs to increase people's purchasing power through the effectiveness of social assistance, job creation, and the provision of supporting facilities.

Third, with the momentum of the political year in 2024, the government can take advantage of this to increase economic growth above five percent.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Friday, December 29 in the price range of IDR 15,360- IDR 15,440 per US dollar.