Rupiah Potentially Strengthens Ahead Of The Release Of Consumer Index Data

Illustration (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate on Wednesday, January 10, 2024, is expected to fluctuate again but close higher against the United States (US) dollar ahead of the release of US consumer price index data.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, January 9, the rupiah spot exchange rate slightly strengthened 0.04 percent to Rp15,520 per US dollar. Meanwhile, Jisdor's rupiah exchange rate closed slightly higher by 0.03 percent to a price level of Rp15,518 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said traders remain very biased towards the dollar ahead of the main consumer price index data released on Thursday.

"This figure is expected to show a slight increase in inflation in December, coupled with strong nonfarm payroll data, providing the Fed with more space to maintain higher interest rates over a longer period of time," he said, quoted Wednesday, January 10.

This prompted a decline in expectations of early interest rates, which in turn cost gold some of the profits earned in December.

The yellow metal still ends in 2023 with an increase of 10 percent

Ibrahim said the Fed officials also rejected expectations of lower interest rates early.

Fed Atlanta president Ralph Bostic said that with inflation still well above the Fed's annual target of 2 percent, he remains biased against policies that remain strict in the short term.

In addition to US data, this week's focus is also on China's inflation and trading figures for December, which will be released on Friday.

The world's largest commodity importer is expected to still experience disinflation in December, while trading activities, especially exports, are also expected to decline.

From an internal point of view, Bank Indonesia (BI) noted that Indonesia's foreign exchange reserves in 2023 reached 146.4 billion US dollars, a jump of 8.3 billion US dollars compared to the position at the end of November 2023 of 138.1 billion US dollars.

The increase in foreign exchange reserves is in line with market sentiment regarding the prospect of lowering interest rates from the global central bank, especially the Fed, which has an impact on strengthening Rupiah by 0.73 percent on a monthly basis (mtm) or 1.10 percent year to date (ytd) to Rp15,396 per US dollar.

Then, Ibrahim said that after a cycle of aggressive interest rate hikes since early 2022, market participants projected that the Fed would start lowering interest rates in the first quarter of 2024, in line with the gradual decline in inflation and indications of soft landing in the US.

"On the other hand, the US economy grew on an annual basis of 4.9 percent in the third quarter of 2023, lower than 5.2 percent in the second estimate. Therefore, this sentiment has had a positive impact on the domestic financial market," he explained.

For information, during December 2023, foreign net inflows in the stock market and bonds were recorded at IDR 7.7 trillion and IDR 8.2 trillion, respectively.

The return of the 10-year results of the Indonesian government also fell by 19.0 bps month to date (mtd) to 6.52 percent.

Ibrahim estimates that the rupiah will fluctuate but close higher on Wednesday, January 10 trading in the price range of IDR 15,490- IDR 15,550 per US dollar.