Rupiah Potentially Weakens Amid External Pressure

Illustration (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate in trading Tuesday, January 9, 2024 is expected to move fluctuating again but closed lower against the United States (US) dollar in line with the decline in market expectations related to cutting the interest rate of the Fed.

Quoting Bloomberg, the Rupiah exchange rate on Monday, January 8, the rupiah spot exchange rate fell 0.06 percent to Rp15,526 per US dollar.

Meanwhile, Jisdor's rupiah exchange closed slightly lower by 0.03 percent to a price level of IDR 15,522 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said traders reduced betting that the Fed would cut its interest rates as soon as March.

"This idea is exacerbated by stronger nonfarm payroll data than expected on Friday which shows resilience in the labor market that provides space for the Fed to maintain higher interest rates over a longer period of time," he said, quoted Tuesday, January 9.

US inflation became the focus after nonfarm payroll data shocked Pasar is now focusing on the main data on US consumer price index inflation (CPI) for December, which will be released on Thursday.

Ibrahim said the figure came after a strong salary report, estimated to show an increase in inflation from the previous month.

Signs of rigid inflation are a bad sign for Fed's speculation of an early rate drop in interest rates, given that labor markets and inflation are the two main things the central bank considers when adjusting monetary policy.

"The Fed has also warned that high signs of inflation and labor market power will most likely hamper an early drop in interest rates," he explained.

The CME Fedwatch tool shows traders recalling their expectations of lowering interest rates in March.

Traders now expect an opportunity of around 63 percent to lower interest rates by 25 basis points in March, down from the more than 73 percent chance expected last week.

From an internal point of view, the sense of optimism for economic growth in Indonesia in 2024 is increasing among entrepreneurs and smart people, especially entering the political year.

Indonesia has capable people who will be able to carry out their duties in regulating the Indonesian economy.

They are projected to support any president elected in the 2024 General Election (Pemilu) later.

Then, Ibrahim said that there is a unique behavior from businessmen or investors in Indonesia in 2024.

They will run a business as usual, and will not be disturbed by the election.

"And what is interesting in this election is that the business world, both foreign and large Indonesian conglomerates, does not adjust their investment or commercial behavior because of the election," he explained.

For information, over the last 25 years, the business world in both Indonesia and foreigners has tended to stop or be careful in making large investment decisions and commercial decisions ahead of the election.

This is due to the potential change in policy from the elected leader.

Ibrahim estimates that the rupiah will fluctuate but closed lower on trading Tuesday, January 9 in the price range of IDR 15,510- IDR 15,550 per US dollar.