Rupiah Potentially Fluctuating Haunted By The Issue Of Cutting US Interest Rates

Rupiah (photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Monday, January 8, 2024, is expected to fluctuate but close lower to the United States (US) dollar in line with the decline in the expectations of relevant traders that the Fed will start lowering its interest rates no later than March 2024.

Quoting Bloomberg, the Rupiah exchange rate on Friday, January 5, the rupiah spot exchange rate fell 0.16 percent to Rp15,516 per US dollar. Meanwhile, Jisdor's rupiah exchange rate closed slightly higher by 0.05 percent to a price level of Rp15,518 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said Greenback jumped this week as traders sought more confidence that the Fed would start cutting interest rates in early 2024.

"The traders are seen to reduce expectations that the Fed will start lowering its interest rates at the earliest in March 2024, while the full coverage of the potential cut is still unclear," he was quoted as saying Monday, January 8.

In addition, the CME Fedwatch tool saw traders lower their expectations of lowering interest rates in March 2024 to 62 percent from 72 percent seen in the previous week.

The weakening labor market and weaker inflation are the two main factors considered by the Fed in cutting its interest rates.

Although both have weakened substantially in recent months, traders are still not sure if it will be enough to push the Fed's aggressive monetary easing by the Fed by 2024.

From an internal perspective, the Government is optimistic that Indonesia's trade balance performance will still record a surplus in 2024. As of November 2023, Indonesia's trade balance has a surplus of 43 consecutively with a value of 33.63 billion US dollars.

As is known, the government has also set a trade balance target for Indonesia in 2023 with a surplus of 38.3 billion US dollars 38.5 billion US dollars. This means that the achievement of 33.63 billion US dollars is still achieving the specified target.

This figure decreased by 16.91 billion US dollars compared to the same period the previous year which amounted to 50.54 billion US dollars.

Ibrahim conveyed that in order to continue to achieve and maintain the trade balance surplus of the Republic of Indonesia, his party is trying to find new markets and develop added value in trade.

"In order for the trade balance to remain in surplus, the hard work of all existing stakeholders and the keywords are collaboration, finding new markets as added value," he said.

For information, BPS recorded a trade balance surplus in November 2023 supported by a non-oil and gas commodity balance surplus of US$4.62 billion. Donated by mineral fuel commodities, animal/vegetable fats and oils, as well as iron and steel.

Meanwhile, the trade balance for oil and gas commodities showed a deficit of US$2.21 billion, mainly commodities that contributed to the deficit, namely oil and crude products.

Ibrahim estimates that the rupiah will fluctuate but closed lower in trading Monday, January 8 in the price range of IDR 15,510- IDR 15,560 per US dollar.